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: Think4Yourself who wrote (67950)	6/9/2000 11:27:00 AM
From: Big Dog	Respond to of 95453

Day rates tend to reflect the cost, sort of. More than cost, however, day rates are determined by supply/demand. It's possible that a drillship could be earning $200,000/day while a small jackup is at $20,000 a day. There are more jackups than drill ships. The cost of operation of a drill ship is much higher than a small jackup. What really happens is that drillers, after they own a rig, will work it for the best price they can get that is above the cost of stacking. If demand dropped off and say only 10 out of 30 of a certain type of rig was needed, then the day rate would be not far above the direct operating cost less stacking cost...regardless of whether you paid $3 million or $300 million for the rig. And regardless of how much or how little debt you have associated with the rig. No demand, no profit. Low oil/gas price, no demand. It's the price of oil stupid! The changes that may be coming have the potential to smooth the volatility of the industry. I don't know if this is good or bad for stocks of these companies, however. If there is no BOOM following a BUST, then these babies may just trade like utility stocks. It is that hope for a BOOM coming out a BUST that gives these stocks their sex appeal. big