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

To: Now Shes Blonde who wrote (58542)	1/14/2000 3:56:00 PM
From: ItsAllCyclical	Respond to of 95453

PXD action interesting. 4 large blocks in last 15 min. 20K at 8 5/8, 33K at 8 11/16, 15K at 8 3/4, 25K at 8 3/4. Still watching. Bought more March 7.5 calls when I saw the first of the 4 go through.

To: Now Shes Blonde who wrote (58542)	1/14/2000 3:56:00 PM
From: RealMuLan	Respond to of 95453

Moody's may cut Friede Goldman Halter conv notes Friday January 14, 3:31 pm Eastern Time (Press release provided by Moody's Investors Service) Approximately $185 Million of Debt Securities Affected. NEW YORK, Jan 14 - Moody's Investors Service placed on review for downgrade Friede Goldman Halter's (FGH) B2 rating on $185 million of 4.5% convertible subordinated notes due 2004 issued by predecessor Halter Marine. A negative ratings outlook was assigned June 4, 1999, citing declining order backlog, negative newbuild trends, and exposure to Friede Goldman's cost overrun and delay dispute on a newbuild drilling rig contract with Ocean Rig Norway (B3; review down). The senior implied rating is Ba3 and senior unsecured issuer rating is B1; these ratings are also under review for downgrade. The new $120 million secured bank borrowing base revolver and $44 million secured letter of credit facility have not been rated. By historic measures, the merged FGH has a strong market position, but it is digesting four major semi-submersible cost overrun and delay contract disputes at time when sector conditions are very weak, its order back log has fallen to around one year's revenues, and much of that backlog is in disputed contracts with financially weak customers. Substanial claims and counter claims have been filed on the two Ocean Rig Norway rigs and work has been substantially reduced on the two Petrodrill/Amethyst rigs. Moody's review will focus on the impact of the contract disputes on working capital trends, fourth quarter results, the range of possible contract dispute outcomes, new order trends and expectations, and the degree to which FGH has ample visible liquidity and letter of credit capacity to tide it through the current trough. FGH must have letter of credit availability to win major new construction contracts. A sector recovery in drilling rig construction is not expected for well over a year or two, though a material but highly competitive market exists for assets used in the production phase of offshore oil and gas production. Friede's backlog had declined from $407 million on 3/31/99 to $338 million by 9/30/99, a major amount of which is in deepwater semi-submersible rigs. Halter's order backlog declined from $784 million on 12/31/98 to $394 million by 9/30/99, though management reports that an average of another $60 million to $80 million of annual vessel repair revenue is not included in the order backlog. Moody's expects FGH to continue to win its share of non-oil sector business unless its financial condition eroded to a point that impedes its ability to arrange letters of credit. The Friede Goldman and Halter Marine merger combined two firms with long-standing strengths in a highly cyclical sector. The merger combined Friede's lower leverage and strengths in offshore drilling rig construction and repair with Halter's higher leverage and fairly diversified strengths in vessel construction and repair for the oil service, commercial, and small naval vessel sectors. The business requires conservative capitalization. Friede and Halter each encountered serious difficulties in constructing advanced deepwater semi-submersible rig new build contracts - Friede with Ocean Rig Norway and Halter with Petrodrill/Amethyst. Delays and cost overruns have been substantial and claims and counter claims have been filed between FGH and Ocean Rig. FGH and Petrodrill/Amethyst would need to work out a resolution of their differences as well and FGH has substantially reduced work on those rigs. The situation is complicated since Petrodrill/Amethyst's drilling contracts with Petrobras for the completed rigs may be cancelled. However the disputes are resolved, it is Moody's view that a workable settlement of the disputes requires compromise by all parties. Both Ocean Rig Norway and Petrodrill/Amethyst are highly leveraged entities formed to build and then operate the newbuilds in question - each is highly leveraged, their liquidity is thin, and they can generate no revenues until the rigs are completed and operating. Ocean Rig does not yet have drilling contracts for its rigs and it likely will be hampered in this regard until uncertainties concerning completion and delivery are resolved. While Petrodrill believes it still has drilling contracts with Petrobras for its rigs, upon delivery, Petrobras has threatened in writing to cancel the contracts. Alternatively, if Ocean Rig and Petrodrill still want delivery of the rigs in question, it seems they may need to reach a workable compromise with FGH. If Petrodrill/Amethyst did lose its Petrobras contracts, its need for the rigs could ride mainly on whether it was in its economic self interest (and Amethyst lender MARAD's) to complete the rigs without a visible drilling contract. The June 4, 1999 negative outlook related to the uncertain timing of, and levels to which, the sector's and FGH's order backlog would bottom, the potential extended period of time before material new orders resume, and the need to assess the annuity earnings power inherent to serving the offshore sector's underlying trend of rig and vessel maintenance, repair, and overhaul work. Recovery in oil service vessel and rig newbuild/upgrade activity materially lags recovery in oil field services activity. And if FGH wins large proportions of available work, regional and global competition for available work could hurt margins on new business. Partial mitigants to a slowdown in FGH's vessel and drilling business may include its effort to win newbuild orders for asset classes used in the construction and production phases of a growing population of deepwater fields. But margins on this business are not known at this time and FGH may face an inherent design and construction learning curve Moody's is concerned that the substantial 1997-98 sector surge in vessel and rig newbuild and upgrade activity, followed by the lasting impact of 4Q97 to 1Q99 weak oil prices on oil company spending priorities, may have satisfied the bulk of the offshore sector's intermediate-term need for new or upgraded drilling rigs and service vessels. The demand surge was driven by the exploration and production sector's surge in shallow and deepwater spending. Strong price expectations and the emerging deepwater markets triggered a bulge in deepwater spending to create a fleet of assets that had not previously existed. Oil price volatility is not conducive to the confidence exploration and production companies need to make major new commitments to the deepwater market beyond the level of work that the recently expanded fleet of deepwater rigs and service vessels can already handle Friede Goldman Halter, Inc. is headquartered in Jackson, Mississippi. biz.yahoo.com