Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: AltLar who wrote (41917)	4/9/1999 1:14:00 AM
From: SliderOnTheBlack	Read Replies (3) of 95453

LarryC; FLC vs. RIG - the short version... Without posting paragraphs of numbers; FLC has a high degree of debt - virtually the highest borrowing -debt leverage of the drillers. Because of their high debt and the cost (drain) to cash flow and earnings to cover their interest/debt payments - their earnings are more negatively impacted than the other drillers when oil prices are low and when Rig Utilization and dayrates drop as a by - product of low oil prices. When & if Oil prices return to historic norms; all of this debt and cooresponding high interest cost that was used to fund a highly aggressive Deepwater Rig construction program will probably pay off in spades as they have a series of new high tech deepwater rigs coming online. These rigs are basically built with existing longterm contracts allready locked in; but because FLC also has a huge fleet of jack ups (shallow water units) and barge drillings units - they have the potential to show the highest increase in earnings of any driller in an upturn; if not the ability to earn more money than virtually any other driller in an upturn. Conversely; RIG is a pure deepwater company; they do not have the exposure to the shallow water markets - which is more volatile and receives lower dayrates for these types of rigs (jack ups). RIG also leads the sector in the number of ultra deepwater wells drilled in over 5000 feet of water. Their experience is unmatched here. They also have the highest level of longterm contracts in the sector. FLC has much more risk - but a much higher potential reward ; RIG less risk - a little less reward potential.... A thinking man; wanting some risk, and a lot of reward; might buy RIG to FLC in a 3 to 4:1 ratio perhaps... I would own both companies - they complement each other. Hope this helps - tried to keep it short without all the numbers; all the numbers are of course important as well...you probably know where to find the numbers. Yahoo's profile & reseach screens, Zacks, First Call estimates and SSB & Merrill have ''free'' analyst reasearch via the net currently etc...

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