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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: JungleInvestor who wrote (41463)4/1/1999 5:32:00 PM
From: Big Dog  Read Replies (2) of 95453
 
Tarzan Man -- You hit on something there re FLC/BP/Vastar.

I can tell you that many folks thought/think that Vastar "over speced" the rig it contracted from FLC. They got a Cadillac. The combo of BP/Amoco/Arco would likely have plenty of drill power to do whatever Vastar needs to have done without taking on a 200,000 a day 3-5 year commitment.

This is an excellent chance for a renegotiate and would put FLC in a delicate situation. I don't think FLC would continue to build the rig without the Vastar contract at the current rate. So the end result could very well be a cancellation of the drilling contract and the construction contract. Not good for FLC, yet it doesn't really cost them anything as I am sure there would be steep penalties (not sure what stage the contract is at today -- letter of intent?, firm contract?, etc.)

What it does do is reduce FLC's earnings visibility going forward, and it further weakens the "sanctity" of the drilling contracts (assuming this is a firm contract, which I don't know if it is).

Also, BP may not take in Vastar shares...

Vastar runs pretty good on its own and they may not mess with them.

It will be interesting to see how this plays out, but I bet a bunch of those FLC junk bond holders are sweating it about now...like I said in the ODB newsletter, the underwriter should get paid double for getting those bonds sold...what was it PT Barnum said?

big
loosbrock.com
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