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To: Sunny Jim who wrote (53540)	10/26/1999 7:30:00 AM
From: Big Dog	Read Replies (3) \| Respond to of 95453

Maybe I can help re FGI/Ocean Rig. If they do not settle the dispute before earnings announcment time (Nov. 15) they must take a charge against 3Q earnings. If they DO have a settlement prior to Nov. 15, they do not take the charge...depending on the amount of the settlement. Negotiations are continuing, and there is a fair chance of a settlement prior to Nov. 15. Fair chance, not good chance. If the charge is taken against 3Q, the earnings will show up again in the quarter when the settlement is resolved...4Q? And will then be a nice little earnings boost...which will be ignored since it is a "one time" extraordinary gain. I still think this is an excellent buy right here, right now...especially if there is a sell off today (which there may be on the opening but will not last long as the day progresses). IMO, of course. big atoffshore.com

To: Sunny Jim who wrote (53540)	10/26/1999 3:57:00 PM
From: pt	Respond to of 95453

Yes, it is impossible to tell (FGI/Ocean-Rig). But I think we need to fine tune the analysis "s p" posted. FGI's $13 million estimated maximum exposure is a) their interpretation of the contract limitations on "all types of delay damages"; and b) pre-tax, presumably. $13 million is $0.555/share, before tax effect. It looks like that would be around $0.39/share after tax. Using sp's analysis, that would make the earnings "miss" a whole lot worse. But I don't think we can use that approach. The accounting rules dictate restrictions on contract revenues that can be recognized in the quarter. This is entirely different than the issue of what management believes is the maximum they would have to pay to Ocean Rig for delay damages. The company's forecast was for $.20 to $.30 after tax effect per share, with an estimated $.07 to $.09 per share effect for each $5 million change in the estimated ultimate recovery. So we can look at it a few different ways: (Note, column A is based on recent EPS estimates; column B is based on the "90 days ago" EPS estimates. These are subdivided to show the effect of the .10 range of the original estimate of the Ocean Rig effect.) Approach #1 (Earnings "miss"): A1 A2 B1 B2 Analysts expected: .19 .19 .35 .35 Forecast O/R effect -.30 -.20 -.30 -.20 ---- ---- ---- ---- Net -.11 -.01 +.05 +.15 Per press release -.36 -.36 -.36 -.36 ---- ---- ---- ---- Assumed earnings miss -.25 -.35 -.41 -.51 * * * * * * * * * * * * * * * * * * * * * * * * Approach #2 (Revision of estimate of O/R effect): A1 A2 B1 B2 Analysts expected: .19 .19 .35 .35 Per press release -.36 -.36 -.36 -.36 ---- ---- ---- ---- Assumed O/R effect -.55 -.55 -.71 -.71 Original O/R forecast -.30 -.20 -.30 -.20 ---- ---- ---- ---- Change in O/R effect -.25 -.35 -.41 -.51 (Bottom line shortfall is the same; the difference is in fitting an explanation to the numbers.) At $.07 to $.09 per share effect for $5 million change in the settlement estimate, one interpretation is that FGI has cut their estimate of the Q3 effect of the ultimate recovery from Ocean Rig by somewhere between $14 million and $36 million. Note that the Q3 effect appears to consist of the ultimate recovery multiplied by the estimated completion percentage of the contract. Either the recovery or the completion percentage estimates, or both, may have changed. If the current and past analysts estimates numbers (from Yahoo) are correct, I would think that the slide from $.35 to $.19 was largely due to Ocean Rig, but I don't know for sure. Anyone have any insight on that? I honestly don't know what to make of these numbers. Is the company using the Ocean Rig situation as an excuse to dump everything possible into Q3 so the numbers look better going forward? Just how bad is business now? My guess is that there is both an overall deterioration in earnings, and a less optimistic estimate of what will be recovered from Ocean Rig, putting the truth somewhere between the results of approach 1 and approach 2. The numbers are unsettling either way, as they seem to paint a much grimmer picture than just a few weeks ago. Volume hasn't spiked up today, which suggests the shorts aren't covering to any significant extent yet. Is there more bad news they know or think is coming? paul