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Technology Stocks : SEITEL (SEI) -- Ignore unavailable to you. Want to Upgrade?

To: Don Earl who wrote (404)	1/8/2002 10:40:00 PM
From: Don Earl	Read Replies (1) \| Respond to of 427

HOW ARE MARKET CONDITIONS FOR SEITEL RIGHT NOW? Well, Baker Hughes keeps track of drilling activity, and the rig counts in North America have been declining steadily for the past 6 months. biz.yahoo.com From the 1/4/02 PR: biz.yahoo.com <<<The number of rigs searching for oil rose by one to 138, while the number of rigs searching for gas fell by four to 744.>>> Natural gas exploration activity accounts for 85% of North American drilling projects. Production cuts by OPEC does not do much for natural gas prices. In fact, natural gas futures are trading at the bottom of the chart: futures.tradingcharts.com It might be hard to think of "North America" as a niche market, but virtually every other player in the sector is diversified throughout the world. Seitel is essentially limited to market conditions in the US and Canada. From freeedgar.com <<<The Company markets seismic information to the oil and natural gas industry in two ways: sales from the largest data library in North America and sales of new multi-client seismic data surveys, including two-dimensional ("2D"), three-dimensional ("3D") and multi-component, in both the onshore and offshore segments. The Company has a strong market position in the United States and Canadian seismic data library markets owing to its 1.1 million linear miles of two-dimensional and 19,200 square miles of three-dimensional seismic data.>>> From Hart's E&P net: eandpnet.com <<<According to a Lehman Brothers publication of information from World Geophysical News, 56 crews were working in the United States in September, down from the year’s high of 63 in April and less than half of the 134 rigs working in September 1998. All that annual decline came from onshore seismic activity. Offshore, the 18 active crews matched the high for the year, and three-quarters of those vessels were shooting 3-D or 4-D seismic. Canada’s 16 crews working in September was a drop from the nonsummer high of 24 in May. Internationally, not counting the United States and Canada, the Lehman Brothers report showed 182 crews working, down from a high of 211 in June. The count of 50 marine rigs was the low point of the year, down from a high of 76 in January. Nearly 55% of the marine crews were shooting 3-D or 4-D seismic. It will take a significant upward move in prices next year to increase those crew counts.>>> It is worth mentioning that Seitel does not run a single seismic crew. Nor does Seitel claim to own a single mile of the new 4D technology. Seitel's main source of revenue is reselling old technology from their existing library. Where Seitel's competition tends to build a large backlog of contracts to do new surveys when commodity prices are high, Seitel's business is basically "on demand" depending on current market conditions. With natural gas prices in the basement, there is no obligation for natural gas producers to purchase library data from Seitel. In Seitel's cash flow statement for Q3, you will find an entry of $39.4 million in non-cash sales on the 5th line for the 9 months ended. freeedgar.com This compares to $9.4 million for the 6 months ended on the Q2 report. freeedgar.com In other words, $30 million of reported Q3 revenue was the result of non-cash barter transactions. The fact is cash sales dropped by over 60% from Q2 to Q3. With continuing weakness in the North American economy, further declines in the rig count, and a sharp drop in natural gas prices, there is no reason to believe Seitel will show any improvement in Q4.