SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Gold/Mining/Energy : Strictly: Drilling and oil-field services
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: Chuzzlewit who wrote (24509)6/22/1998 2:28:00 PM
From: Czechsinthemail  Read Replies (2) of 95453
 
Chuzzlewit, The urgency of the need to drill may seem less when oil prices are low, but it is not because the number of barrels pumped has declined. It is more that refiners and major integrated companies can get a more than adequate supply of cheap oil without having to commit funds currently to drilling projects. Though ultimately they would have to drill to replace depleted reserves, the urgency in doing so is less when oil seems cheap and abundant relative to immediate and near-term demand. Why drill when you can buy a virtually limitless OPEC supply on the cheap? Essentially, it means they can get oil without depleting their reserves. The result we are seeing is stacking of land rigs and harder bargaining with offshore drillers generally resulting in full utilization but at lower dayrates. When oil prices are high and forecasted to be high, the competition for rigs based on a higher forecasted profitability on drilling projects means someone will snatch up all available rigs so we see a hog rush to the trough effect that boosts drilling dayrates.
I think what we have been seeing is a sea change in thinking about oil prices and total demand for oil that both will be lower longer than people had earlier forecasted. That may or may not prove correct. Rising oil prices suddenly improve the projected profitability of drilling projects and will renew the competition for rigs to drill them. Currently, the area where we're seeing that competition is primarily in the deep drilling sectors because of the twofold impact of better economics on the huge fields these projects can tap into and a scarcity of rigs capable of drilling them. But even here, the prospect of more deep rigs coming on stream and lower dayrates for shallow rigs may have a dampening effect on the deep drillers as well.
Baird
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News