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

To: Think4Yourself who wrote (46289)	6/11/1999 12:02:00 PM
From: Wowzer	Respond to of 95453

Just to add your comments, he liked the following stocks: FST DVN UPR Rory

To: Think4Yourself who wrote (46289)	6/11/1999 12:11:00 PM
From: upanddown	Read Replies (1) \| Respond to of 95453

For those without TSC subscriptions, the article from Mavis was a good news, bad news thing not really covered by the headline. New contracts but at much lower rates. Full text... Possible Petrobras Contracts Could Bail Rigs Out of Deep Water By Mavis Scanlon Staff Reporter 6/11/99 10:41 AM ET Transocean Offshore (RIG:NYSE) and Diamond Offshore (DO:NYSE) are on the verge of winning drilling contracts from Brazil's Petrobras, according to two industry analysts and an institutional investor. The contracts would be welcome news for both companies: The Diamond rig involved has been idle since December, and the Transocean rig was about to go off contract next month. The contracts also could signal that things aren't as bad in the deep-water market as they've appeared recently. But at the same time, things are far from good. The expected rental rates in the deals are low, highlighting the continuing weakness in the market. There simply are too many available rigs capable of drilling in the world's deeper waters, a situation that has nearly halved rental rates in recent months. According to the analysts and the investor, contract awards from Petrobras are imminent for the Discoverer Seven Seas, a Transocean drill ship capable of drilling in 7,000 feet, and the Ocean Clipper, a Diamond drill ship capable of drilling in 7,500 feet. Petrobras officials couldn't be reached for comment. Transocean has only a letter of intent from Petrobras at this point, according to Jeff Chastain, Transocean's director of investor relations. "At the point at which we do have a firm contract, assuming that does happen, the company would put out a press release," Chastain says, because the work would last "slightly more than two years." He declined to comment on the potential per-day rental rate, but the investor says the rental rates on both rigs would be from $100,000 to $110,000 per day. At $100,000 per day, a 2 1/2-year contract would generate just over $90 million in revenue. The Seven Seas is under contract to Exxon (XON:NYSE) until July and is working in the Gulf of Mexico at a rental rate of $143,000 per day, Chastain says. Diamond's Clipper has been in a shipyard since late December, when BP Exploration, a unit of BP Amoco (BPA:NYSE ADR) canceled its contract because of recurring mechanical problems with the ship's main safety system. Gary Krenek, Diamond's chief financial officer, says the company is bidding for work for the ship, but declined to comment on contract possibilities. The Clipper will start drilling one well on a turnkey basis in about a week and would be available for new work in 60 days, he says. If Petrobras does award the contracts, it would signal the Brazilian firm's continued interest in deep-water exploration, which would be positive news, says the institutional investor, who doesn't own Transocean or Diamond but follows the industry closely. Petrobras only recently unnerved the market by canceling contracts, one with R&B Falcon (FLC:NYSE) and two with a joint venture of Pride International (PDE:NYSE) and a Brazilian service firm. But a contract Transocean recently signed for its Transocean Rather, a semisubmersible, or floating rig, capable of drilling in 4,500 feet, is emblematic of the troubles in deep water. The rig is under contract to Shell, a unit of Royal Dutch/Shell (RD:NYSE ADR), at a rental rate of $175,000 per day, Chastain says. But that contract ends next month. To keep the rig working, Transocean took a 30-day to 45-day contract with Mariner Energy at a rental rate of $65,000.