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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (17718)	2/1/2003 12:56:42 PM
From: quehubo	Respond to of 206099

Russ- Remember our strategies may be different. I am trying to play now mostly the stocks that will move first. I dont think the floaters DO GSF RIG will move first. Roll from leaders to laggards and then try anticipate what ever the sub sector plays are as the cycle evolves. I would prefer GLBL HOFF MDR as better laggards than GSF DO RIG. If I am not mistaken the floater market is primarily oil directed as the deeper GOM has been found to be mostly oil and not gas. Any one care to comment on this? Lehmans data collection and scrubbing of data has been invaluable. You have to consider the analysis they provide through Fidelity and what they may be saying to their favored clients. So far only RJ has been bold enough to call for $5 NG, they have been correct where others have been and continue to be timid as far as their street talk. We may have some extremes from now to April 1 and maybe the market needs to become a little more aware of some of these potential extremes. But I think 700 bcf with some serious damage to distillate stocks is a done deal. Over the next two weeks this should be discounted in the equities. Sooner or later drilling will follow the NG prices.

To: russwinter who wrote (17718)	2/1/2003 9:02:30 PM
From: Sharp_End_Of_Drill	Read Replies (3) \| Respond to of 206099

Russ and Que, gotta respond to the driller's with heavy floater percentage posts. >>>I would stay away from drillers with heavy floater ownership. RIG GSF DO<<< That's very perceptive and very correct. The mid-water floater market is basically dead everywhere except West Africa. Norway is just about completely dead. The rest of the North Sea is extremely weak, just a bit removed from dead. The GoM is weak, but fairly flat. West Africa is fairly flat. Brazil is decent. Overall though, the story is very very weak demand. Another issue is the companies that built deepwater rigs in the last cycle are going to be faced with trying to recontract them in the next year or two. As these existing three to five year contracts run out there is going to be a fairly sudden and large supply of deepwater rigs on the market, at a time when demand is very weak. Right now a good deal of operators with deepwater rigs are looking to farm them out, or otherwise get out of contracts, as they are running low on drilling plans, and their capex is being cut back. When the contracts are up, the situation looks at the moment to be bleak. That's a good part of why they are trading so low. Russ, your point that >>>I think deepwater makes a big comeback fairly soon, and the leverage is huge.<<< may not be correct. The leverage is always the highest on the lowest dayrate rigs. Take for example a jackup that costs 25k per day to operate. If they are getting 35k now, their cashflow is 10k per day. If dayrates go up 20% to 42k per day, their cashflow almost doubles to 17k per day - that's leverage. Contrast that to a deepwater rig that costs $75k per day to operate. If their dayrate goes from $150k to $180k their cashflow only goes up about 50%. The example is even more dramatic for a tender assist barge costing $15k per day to operate, or a swamp barge costing less than $10k. The trend is higher leverage on junkier assets. There is much less leverage in deepwater, much higher operating costs, vastly higher capex, much higher costs to stack a rig, etc. On a low spec. jackup or barge you can almost lock it up and walk away. A crew of a few guys to run machines a few times each week is all you need, cost of only a few thousand per day. On a deepwater rig you have to keep a substantial crew onboard, and run engines & HVAC to keep all the computers and electronics preserved. High fuel and personnel costs mean it may cost $35k per day to stack a fifth generation drillship. In summary, the risks to rig owners have gone up dramatically as they went deeper, while the leverage to upside has decreased - a losing proposition. In my opinion the best way to play a rebound in gas drilling is land drilling, swamp barge, and jackup companies. Sharp