Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: articwarrior who wrote (51257)	9/16/1999 10:34:00 AM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 95453

Artic: again - my discussion on FGI is entirelly related to the next 12 mos. If you think that either the Shipbuilding, or the Offshore Rig Construction business has "ANY" substantial positive nearterm upside (in the next 9 mos.) - honestly; not being insulting - you are totally uninformed - period. How many industry subsector CEO's have to come out in plain and simple english and say: the Offshore Rig business has not yet bottomed, recovery is still perhaps 18 mos. away, that due to the merger activity in the Oilpatch - that these companies are NOT going to open up Cap Ex spending on Offshore Projects or Rigs in the nearterm... ie: the total absence of Big Oil in the recent GOM Offshore Leases... Honestly folks; there is no possible debate about the potential for Offshore Rig, or Ship Building in the next 9-12 mos. There is near ZERO demand for FGI's core product in the next 6-9-12mos. - ultimately; surely there will be a growth phase, per the commentary of the age of the offshore fleet - on this I agree; but my entire point; is this is "dead money" in the single worst subsector nearterm in the Oilpatch - on a fundamental basis. Shipbuilding ? they have a core base of work - but look at their margins, the pricing pressure in the Industry - and I point to the tremendous pressure they will receive from Asian - Korean Yards - Hyundai etc... there is zero pricing power in shipbuilding here - and rising competition from Asian Yards is not good... Think HMAR needs to buy any more boats ? - have you checked on how HLX's boat customers have been doing lately ??? - yes; they have a nice core business; but this is a downturn period for Cap Ex Spending in the ships as well. This subsector - gets Cap Ex $ at the end of Oilpatch Rallys - not at the beginning... The Industry needs 2 years of sustained Oil Prices and revenue at these levels before there will be any major Cap Ex spending in either FGI, or HLX's subsectors... for stock traders - the next 12 mos - this subsector is near the bottom fundamentally... if you are thinking 3+ years out... I have no arguement, just an underperformer for the next year. Imho; the only serious arguement here; is that FGI/HLX is undervalued on a replacement value/NAV basis etc... or, that it is deadmoney for a year - but the upside in the far distant future is bright etc... but; nearterm ?????? you can't possibly be serious in arguing for this subsector having virtually "any" major level of Cap Ex spending coming to the entire subsector in the next 6-9-12 mos. It just isn't FGI - this is the worst, least leveraged subsector in the nearterm to this entire Oilpatch turnaround... this is a late stage recovery stock...and they saw a blip in demand for offshore rigs on their prior run up; this was a once in an Industry Cycle peak. Presently - with all of the cancellations, the litigation etc - how can anyone seriously think there is some overnight demand for the very product that virtually every company is trying to cancel, delay and litigate over ? It no longer matters if you are indeed "the yard of choice" if for the next 12 mos. there isn't going to be any major cap ex expenditures in the ENTIRE subsector ! It's all about the "pie" shrinking.... the "pie' is shrinking .... the pie is shrinking... the pie is shrinking... I do agree with one comment however; I do not think HLX needs FGI here... this one may not be over. What if FGI sells off to $8 here ? - Will HLX take the deal (VBG) ? Long HLX is the "safe" play if you "have" to be here imho... if the merger doesn't happen - HLX is more undervalued than FGI.