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

To: russwinter who wrote (19711)	3/5/2003 11:49:16 AM
From: Big Dog	Respond to of 206183

Replacment cost value means little, other than serving as a barrier to entry. As much as they won't want to, I think oil companies, with their lower cost of capital and ability to abosrb the capital risk, will be the financiers of new rigs in the future. The oil companies have created such a situation through a history of cancelling contracts due to changes in the market and by not allowing drillers to make a reasonable return on capital deployed. (A multi-year contract "with teeth" is equivalent to financing the rig, however it does not give the driller access to the lower cost of capital of say ChevronTexaco, for example.) It will be interesting to see how tight current and forecasted rig supply will have to be before we start to see oil companies "change modes". big

To: russwinter who wrote (19711)	3/10/2003 10:31:42 PM
From: Sharp_End_Of_Drill	Read Replies (1) \| Respond to of 206183

Russ, sorry if this is a late reply, I've been out of pocket. <replacement value is a horrible horrible way to try to trade this sector.> >>>Can't really agree as it's the only fleet we have, and as you say there won't be more coming, if ever.<<< Fair enough, you don't have to agree. Lots of folks have gone down in flames thinking replacement value has any relevance whatsoever. The only thing that matters for rental companies is cash flow and profits. On the second thing - when more rigs are coming. The answer is not now, until 'now' suddenly turns into now. We will start building rigs again with reckless abandon as soon as some more oil companies whisper sweet nothings in our ears. Drilling companies love to build rigs, and are mighty gullible when it comes to inking deals. Sharp