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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: LTK007 who wrote (29159)9/7/1998 9:18:00 PM
From: Aggie  Read Replies (2) of 95453
 
To All:

I have been following FGII in the background, being vested in a number of drilling contractors. I work in the international exploration business, in particular the drilling side. In the past few months, I have seen a robust drilling economy grind to a halt. I am interested in your viepoints.

1. A number of the latest generation new build drillships and floaters are already beginning to manifest substantial to massive cost overruns as they proceed towards completion in the shipyard. My own personal rule of thumb is that shipyard work, like home remodelling, generally costs 1.5 to 2x budget.

2. A number of contractors who had planned multi-million dollar upgrades to floaters (in water depth capability and drilling equipment) which have been busy for the past few years at increasing day rates, have put these plans on hold indefinitely until the market shows signs of turnaround. Which it ain't, yet.

3. How long do you think it will be before some of these contractors begin to balk at payment for cost overruns?

4. How long do you think it will take rig builders like FGII to recover from the fallout of this downturn?

Common sense tells me that the rig builders are going to be followers in whatever rebound we experience in the sector, not leaders, so for now I'm still a spectator in the rig builder's baliwick.

Your comments are most graciously welcomed in direct proportion to their maturity.

Thanks for your input, good luck.

Regards,

Aggie Drill Dog.

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