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

To: Big Dog who wrote (40888)	3/27/2005 7:59:03 PM
From: t4texas	Respond to of 206222

while i agree with you, mostly, on rdc, rdc had considerably more on the line than just a day rate contract with bp. rdc and bp's contract included building the gorilla for bp's initial use. had it been for a six month or year long contract for an existing gorilla, i don't think even rdc would have sued bp.

To: Big Dog who wrote (40888)	3/27/2005 8:03:35 PM
From: EnergyElmer	Respond to of 206222

Big Dog, the problem I have with the offshore drillers is that over the last five years their ROIC is only 1/2 of what the land drillers posted. On top of that, the offshore drillers are selling at 13.5X FY1 EV/EBITDA versus 8.5 for the land drillers. Of the offshore drillers, only NE has at least a respectable long term ROIC. Also, we are seeing many more spec offshore drilling rigs as a % of total offshore rigs being built than land rigs as a % of total land rigs. HP just signed a contract to build 10 new land rigs to work for Williams. The contract implies an average daily cash margin of around $10,000/day with an implied A/T ROIC on this contract of close to 20%. The rigs are also going to serve an area dying for more rigs - the Rockies. If PTEN, NBR, and GW get margins at even 75% of this on their existing rig fleet, their implied EPS and EBITDA will embarrass current First Call estimates. All of this and they are selling at significant discounts to the offshore drillers who are now seeing at least the beginning of speculative newbuilds with no contracts (i.e. India). While a contract that is broken (like the 97 newbuild cycle) is a problem for all newbuilds, it is expecically painful on a $100 - $150mm jackup for a company with 20 jackups relative to a $10-$15mm land rig for a company with 300+ land rigs. Lastly, given the length of time it takes to build an offshore rig vs a land rig, one needs to assume an even longer cycle and thus takes a larger risk that the contract will not be honored. That all said, I sure wish more of the offshore drillers would be more like RDC in enforcement of those contracts. This may just be a dream though. I do recognize that a few of the E&P companies are starting to order a few land rigs each and this is bothersome from my perspective, but given the large valuation discount and higher ROIC vs the offshore drillers I am willing to assume this risk and will closely monitor its impacts on future pricing.

To: Big Dog who wrote (40888)	3/27/2005 11:24:56 PM
From: jim_p	Respond to of 206222

"It's really not that difficult, huh Jim?" I bought a new Emsco D-2 land rig in 1981 for $3.9MM and sold it in 86-87?? for $1.0MM. I leased it to a company that went belly up a year later. Great tax shelter!!! National made the best land rig. You buy a new National 110 back then for about $4.5MM. It would drill to 20,000 feet. Add a pair of casing jacks and you could go a lot deeper. The limiting factor on the rig was the ability to support the weight of the casing when it was being set. I bought nine new land rigs in less than two years. Back in the late 70's people were placing orders for both land rigs and offshore rigs and selling the slots. Nice profits!! Of course back then they were doing the same thing for private jets. We ordered a Lear Jet in 1980 and we owned it for about a month. Never told the BOD before we bought it and they were not very happy since we already has three other planes. It wasn't very practical to have a Lear for just flying around Texas. By the time you got up it was time to come back down. Back then you weren't in the oil business if you didn't have at least one jet. Ah.....those were the days!!! Fast cars, fast planes and fast women :-)) I used to beat our CEO to Houston from Corpus every time. He took the plane and I drove the Porsche. Fastest time was 2 hours and 45 minutes to go from parking lot to parking lot (211 miles). I'll never forget the time I was cruising about 130 MPH with the top down and a 200 watt stereo blasting away and was passed up by a 240Z. Never did catch him.