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Gold/Mining/Energy : Ensco International Inc. (ESV)
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To: William L. Oppenheim who wrote (1359)6/28/1998 2:16:00 PM
From: Chuzzlewit  Read Replies (1) of 2005
 
William, I agree entirely with your commentary. I believe that one of the big plusses of these companies is very strong cash flows. When this is coupled with depressed stock prices I think the stage is set for buyouts. The most bullish scenario would be a series of cash acquisitions (as opposed to stock transactions).

I am also more firmly convinced than ever that the aggregate demand for rigs is a function of the total available oil and the net rate at which it is being depleted (or replenished). By available oil, I mean oil in currently developed fields. So long as the price of oil is sufficient to support profit, no matter how small, oil will continue to be pumped. The greater the rate of depletion the sooner the oil service sector will rebound. And, as I said before, this will depend to a large part on the recovery of the Asian economies. In my opinion, OPEC cutbacks in production do not solve the problem -- they makes it worse. Thus, I see the market's reaction to OPEC as myopic at best, perverse at worst.

I am also convinced that this setback for the industry will eventually result in a more sustained cyclical rebound because the impulse to build more rigs will be dampened by the current fear in this climate.

TTFN,
CTC
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