Hope springs eternal, and may well spring upwards from here. Who knows? When I fell most depressed that is generally sign of a turnaround. But lest we get too enthusiastic, let us remember that we are definitely in a bearish mode and I, for one, have yet to see any solid evidence of a turnaround. Such evidence may just be around the corner, but I will wait for it to show itself clearly.
The current hot spell may provide some needed relief for natural gas prices, which have been in a tailspin lately. Some evidence of this turnaround was apparent at the end of last week. That is one type of good news we are seeing. The OSX was down 2% Friday. Down from 100 recently. The XOI oil index was looking more favorable at the end of last week. Big oil maybe rebounding from its recent drubbing. So, it wouldn't be surprising to find it bounce upwards in OSX next week.
But, let us not deceive ourselves. The stock market is a discounting mechanism. The trailing PEs don't matter. It's the prospects in '99 and beyond that are driving the market for oil services. Those prospects appear bleak at present.
Take a look at the long term price charts for such stalwarts as CDG, RIG, ATW, SLB if you want to sober up. CDG's current price $32; Jan 1996 price $8. RIG now $42, was $22 in Jan 96; was $9 in Jan 95. ATW now $38; Jan 96 was $12. SLB is $67; was $33. You get the picture. There is considerable room to drop from here if that is where we are going.
I'm not saying that we are going there, but it is in the realm of possibilities. What I fail to see discussed as much as I think it should be on this thread is the productivity of drilling today in comparison with the past. Are we not now hitting new wells with a much higher probability owing to 3D-Sesmic, computational power, and the like? I hear evidence that that is happening, but I don't see much discussion of the impact of such higher productivity on this thread. Do we have any experts out there on this subject? Higher hit rates could make for fundamental shifts in drilling demand and induce a secular decline in such activity.
I hope we turn around on a sustained basis. I have some of these puppies, but fewer than I did a three weeks ago. But, personally, I am not going to reenter relinguished positions until the news gets fundamentally better. We will likely get a pop next week with the Wall Street Week mention and with the heat wave. It is going to take much more than this to turn this market around.
I'm waiting, BWDIK? |
