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

To: Think4Yourself who wrote (51238)	9/15/1999 10:58:00 PM
From: Tomas	Read Replies (1) \| Respond to of 95453

Offshore drillers cautious about pace of recovery By Andrew Kelly HOUSTON, Sept 15 (Reuters) - A nascent recovery in offshore oil and gas drilling markets is likely to proceed quite slowly, offhore drillers told an energy conference here on Wednesday. ``We still think it is going to be nine to 12 months before market conditions improve significantly,' said Robert Campbell, President of Noble Drilling Corp. Firmer oil and natural gas prices augured well for an increase in drilling activity in 2000 and 2001, Campbell told the Dain Rauscher Wessels Energy Conference. However, significant increases were unlikely in the near term, partly as a result of post-merger ``paralysis' among major oil companies taking part in industry consolidation. Campbell said past trends suggested that utilization rates for the global fleet of offshore drilling rigs would recover gradually between now and late next year, with daily rig rental rates or ``dayrates' following in their trail by 2001. Larry Dickerson, President of Diamond Offshore Drilling Inc., said the Gulf of Mexico had been the first drilling market to show signs of a revival after the collapse of global oil prices and weak U.S. gas prices in 1998 and early 1999. Dickerson said a sustained rise in oil prices over two to three quarters usually triggered a rise in drilling rig utilization rates, which ultimately led to higher dayrates. ``We are going through that process right now in the Gulf of Mexico,' he said. Richard Hoffman, Vice President of Investor Relations at Santa Fe International Corp., said his company expected utilization of its offshore drilling fleet to rise to around 100 percent by 2001 from around 73 percent in 1999. However, the market's behavior between 1994 and 1997 suggested that it could take until early 2002 for dayrates to double from current levels and until 2003 for them to triple. Hoffman said a tripling of dayrates and full fleet utilization would result in earnings per share of $4.27 for Santa Fe, assuming an unchanged fleet. In 1998 Santa Fe's earnings per share came to $2.45 and the First Call consensus estimate for 1999 is $1.31. Noble's Campbell said that if dayrates and utilization returned to the high levels of 1997, then Noble could post earnings per share of over $4.00 by 2003, compared with $1.24 in 1998 and a First Call consensus of $0.70 for 1999. Jan Rask, President of Marine Drilling Companies Inc., struck a more upbeat tone than most of his colleagues. Marine is a relatively small player in the industry with high exposure to gas drilling in the shallow waters of the Gulf of Mexico off the U.S. coast. Rask said the company planned to capitalize on the ``tremendous upside' it expects in that market. Rask pointed to the accelerating depletion rates of gas wells drilled in the Gulf of Mexico and said drilling would have to be stepped up considerably to meet U.S. demand for gas. ``If we want to increase the aggregate production in the Gulf of Mexico we must drill many more wells to counteract these tremendous production declines,' he said. biz.yahoo.com