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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: The Ox who wrote (46048)	6/8/1999 12:49:00 PM
From: pz	Read Replies (1) \| Respond to of 95453

Tuesday June 8, 10:59 am Eastern Time Oil services industry ratings still pressured-Mdys ( PRESS RELEASE PROVIDED BY MOODY'S INVESTORS SERVICE ) NEW YORK, June 08 - Credit ratings in the oil services industry remain under pressure and the outlook is negative for a number of players, even if the recent upturn in oil prices is sustained, says Moody's Investors Service in a new report. Moody's believes oil and gas producers will spend about $70-75 billion this year for global oil field services related to exploration, drilling, and well servicing -- down 20% from $90 billion in 1998. This decline reflects financial stress at many producing companies because of low oil prices, and continuing price uncertainty, which has led producers to be cautious in reacting to the recovery of oil prices. ''Demand for oil field services will also be negatively affected by the dramatic surge in upstream consolidation, and by the upstream sector's efforts to improve earnings by reducing operating costs,'' according to Moody's Vice President/Senior Analyst Daniel Gates. In early 1999, oil prices reached their lowest level in real dollar terms in over 50 years, with West Texas Intermediate crude trading at under $11 a barrel. As a result, the number of land drilling rigs working in the U.S. reached an all time low this spring. Oil prices have firmed significantly following the OPEC accord to reduce production beginning April 1st, but Moody's analysts say that there is normally a lag of two or three quarters before a rise in prices is substantially reflected in increased revenue for oil and gas service firms. ''The current downturn will be much less severe than the late 1980s collapse because consolidation has already substantially reduced the number of competitors,and companies in the industry have taken a conservative approach to financing growth,'' Gates adds. The 37 oil service and drilling companies rated by Moody's operate in all segments of the business, with credit ratings ranging from Halliburton's A1 rating to Dailey International's Ca rating. Niche Companies More Vulnerable Than Others The particular portion of the services sector that a services company specializes in also has an impact on its credit ratings. ''The highest rated oil service companies have diversified operations across the spectrum of the energy sectors,'' Gates says, adding,'' Qualitative factors are far more important than current financial performance in the ratings of oil service companies.'' These factors include degree of exposure to the more cyclical components of the exploration and production cycle, company size, capital intensity, diversity of operations, market share, quality and breath of products and services. The leading companies, Halliburton, Schlumberger, and Baker Hughes, which make up about one-third of the industry's revenues, offer services across the oil and gas spectrum, and have broad geographic reach that reduces risk, the rating agency says. "On the other hand, niche oil industry service players that provide services which are primarily related to exploration and development activity, such as Key Energy Services and Dailey, will exhibit more volatile cash flow over the course of the industry cycle. Gates went on to say that the drilling business has commodity characteristics and these ''companies combine high capital intensity with a volatile cash flow because of wide swings in day rates and utilization over the course of the industry cycle.'' Companies such as R&B Falcon and Grey Wolf Inc. fall into this category," Gates adds. Other factors that mitigate credit risk are long-term drilling contracts and having financially stronger companies as customers, Gates says. The report also discusses pricing and utilization rates for drilling rigs, how increasing North American gas production will reduce the industry's cyclical swings, how integrated oil companies have become more dependent on the technology of the oil service industry, and the prospects for future industry consolidation.

To: The Ox who wrote (46048)	6/8/1999 12:53:00 PM
From: pz	Read Replies (1) \| Respond to of 95453

Tuesday June 8, 8:16 am Eastern Time Note: this article has a followup with more information. FOCUS-Oil slips after two days of strong gains LONDON, June 8 (Reuters) - World oil prices lost some ground on Tuesday as dealers took profits in the wake of hefty market gains over the past two days. Bellwether North Sea Brent blend crude for July was trading 17 cents lower in late morning London trade at $15.93 a barrel. Brent had jumped $1.15 in the previous two days' trade as investment fund speculators made a return to the market. ''The market got oversold and bargain hunters jumped back in,'' said a futures broker in London. ''Now we're just getting some profit-taking but the overall trend remains higher.'' Dealers said latest estimates of tight OPEC compliance with output curbs announced in March had helped lift prices. The Organisation of the Petroleum Exporting Countries production in May trimmed output by 440,000 barrels a day (bpd) to 26.14 million bpd from 26.58 million in April, a Reuters survey showed. That translates into 88 percent compliance with targeted output cuts, an improvement from 76 percent adherence in April. OPEC is aiming to remove a surplus in world petroleum stockpiles and dealers said data scheduled for release over the remainder of this week would provide new clues on the cartel's progress toward that goal. Weekly American Petroleum Institute statistics later on Tuesday will show U.S. gasoline demand and inventories after the Memorial Day weekend, when motorists take to the road at the start of the summer driving season in the United States. On Wednesday, Stichting Euroilstock in Brussels releases monthly data for May on European Union oil inventories. Friday sees the widely-watched International Energy Agency monthly Oil Market Report give its verdict on the latest trends in world oil supply, demand and inventory patterns. The IEA report is expected to underscore tighter OPEC compliance in May with output limits but analysts said it might also have to revise higher its estimate of exports from the territories of the former Soviet Union. Russian exports in particular have been booming in recent weeks because of a weak rouble and lower domestic consumption. Prices in dollars a barrel: (Note: this article is ''in progress''; there will likely be an update soon.)