here's today's wsj article (the market has associated TMAR with shallow operating rigs, although most of TMAR shallow rigs are associated with gas price dependency, not necessarily oil price dependency in the gulf - go figure):
10:11 DJS Despite Crude Price Slump, Oil-Service Firms Poised For Profit Ga
10:11 DJS Despite Crude Price Slump, Oil-Service Firms Poised For Profit Gains
By Loren Fox
NEW YORK -(Dow Jones)- A dramatic slide in world oil prices since last
fall has stunned the oil exploration and production industry. As a result,
profit growth slowed, but didn't stop, in the oil-services business.
Analysts expect another strong performance in the second quarter from
the companies that rent drilling rigs, evaluate rock, make drill bits and
provide the whole array of products and services that make the oilfield work.
Industry profits are expected to show about a 35% rise from last year,
said Schroder & Co. analyst James Stone. While that is good news, growth has
slowed from last year's robust pace and even from earlier this year. The
culprit is oil, which has been lingering at $14 to $15 a barrel, well below
the $18-to-$21 range considered typical.
"The oil price has been lower than expected for longer than expected,
so people are cutting their budgets," said Ken Sill, an analyst at Credit
Suisse First Boston Corp.
A survey released this month by Salomon Smith Barney concluded that
1998 spending on oilfield services will rise just 6.2% to about $90 billion,
instead of the 11% increase projected in January.
The oil-price drop was most damaging to U.S. onshore drilling, a market
with lots of "marginal" wells that can be shut down on short notice. Nabors
Industries Inc. (NBR), the world's largest land driller, is expected to report
second-quarter earnings of 33 cents a share, up from 29 cents a year earlier,
according to First Call Corp., which tracks analysts' estimates. Nabors
changed its fiscal year, so the year-ago was then its third quarter.
The oil-price drop was less of a blow to offshore drilling, where
contracts are longer term, but demand has been weakening for shallow-water
drilling rigs. In the Gulf of Mexico, the biggest and most developed
shallow-water market in the world, rates for some rigs have fallen for the
first time in years.
For example, a "jackup" rig - which floats out and extends legs to the
ocean floor - drilling in 300 feet of water in the Gulf of Mexico commanded
$47,500 to $62,000 a day last month. That's up slightly from $44,000 to
$60,000 a year earlier, but down a bit from rates in March, according to
Offshore Data Services, a research firm.
Wall Street expects Global Marine Inc. (GLM), a driller with many
jackup rigs, to post second-quarter earnings of 43 cents a share. That's up
from operating earnings, which exclude one-time items, of 35 cents a year ago.
On the other hand, deepwater drilling - in 1,000 feet or more - has yet
to be hurt by the low oil prices, mostly because those projects tend to be
longer-term and promise greater returns. Diamond Offshore Drilling Inc. (DO),
one of the largest deepwater drillers, is expected to report second-quarter
earnings of 70 cents a share, up from 45 cents a year ago, adjusted for a
2-for-1 stock split in August.
The segment of the oil-services industry least hurt by low oil prices
is offshore construction, encompassing the platforms and pipelines used to
produce offshore wells. That's because oil companies looking to curtail
spending are less likely to defer projects that are ready to be hooked up to
pipes and start producing, said Schroder's Stone.
So Global Industries Ltd. (GLBL), an offshore construction company, is
expected to report earnings of 16 cents a share for its first quarter ended
June 30, up from 11 cents a year ago, adjusted for a 2-for-1 stock split in
October.
But the oil-price malaise is even slowing the large, integrated
providers of oilfield equipment and services. Schlumberger Ltd. (SLB), the
world's largest and most diversified oil-services company, is expected to
report earnings of 70 cents a share, up 17% from 60 cents a year earlier. By
contrast, the company's earnings per share grew by 33% in the first quarter.
Schlumberger is a leader in offshore rigs and oilfield software, both
of which are growing. The company also should record gains from its
high-technology offerings, including systems that evaluate underground rock
formations.
Low oil prices have fostered uncertainty in the industry, accelerating
consolidation. Nothing marked that trend better than the February news that
Halliburton Co. (HAL), another diversified oil-services company, would acquire
Dresser Industries Inc. (DI) for $8 billion - a deal expected to close in the
second half of the year.
Halliburton, a market leader in production services, is expected to
report second-quarter earnings of 50 cents a share, up from 40 cents a year
ago. Dresser, a leader in steerable drills and drilling fluids, is expected to
report third-quarter earnings of 57 cents a share, up from operating earnings
of 50 cents a year earlier.
Thanks to weak oil prices, analysts see Baker Hughes Inc. (BHI)
reporting a drop in third-quarter profits. The company, which is very
sensitive in shifts in the U.S. market, is expected to report earnings of 45
cents a share, down from operating earnings of 46 cents a year earlier.
The merger bug also has bitten Baker Hughes, which had been considered
a potential takeover prospect. The company plans to buy Western Atlas Inc.
(WAI), a geological data specialist. Western is expected to report
second-quarter earnings of 62 cents a share, up from earnings from continuing
operations of 30 cents a year earlier.
Because of the lag time between oil prices and oil producers' spending
patterns, the effect of the slump in oil prices is anticipated to be felt even
more strongly in oil-services companies' next quarter or two.
- Loren Fox; 201-938-5267; loren.fox@cor.dowjones.com
Copyright (c) 1998 Dow Jones & Company, Inc.
All Rights Reserved.
(:BHI) (:DI) (:DO) (:GLBL) (:GLM) (:HAL) (:NBR) (:SLB) (:WAI)
07/13 10:11a CDT |
