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

To: John Carragher who wrote (73326)	10/15/2006 11:00:13 AM
From: Sharp_End_Of_Drill	Read Replies (1) \| Respond to of 206184

John, Exxon typically gets it right. The article was a bit fuzzy about the difference between leases on offshore acreage and contracts on deepwater rigs - but I interpreted it to mean rigs. Exxon sees the large number of newbuilds coming and knows from past experience they will be able to contract or take farm outs at lower prices. Chevron on the other hand has no less than three deepwater ships being built for long term contracts, as well as the existing rigs working for them.

To: John Carragher who wrote (73326)	10/15/2006 12:55:51 PM
From: Big Dog	Read Replies (4) \| Respond to of 206184

Maybe Exxon is being smart...maybe. If history is any guide, these rigs will indeed come down in price. Not oh so long ago there were numerous oil companies burdended with high price rig leases that they were trying to reneogitate or farm out to others. As I have said in the past, the current contracts between drillers and oil companies (which give the analysts all this wonderful "visibility" they love to talk about) means squat if day rates fall to say half of current levels. Should that occur, the contracts will be either modified, re-negotiated lower, or walked away from. And guess who will be there to pick up the rig for half the price? Exxon...??? Of course another significant risk to the "visibility" is execution of the newbuild contracts. I can promise there will be delays and cost overruns. The industry is famous for it. The drillers have a huge plate full of projects that must have perfect execution to make the numbers work and meet the projections...perfection won't happen. What is Exxon's down side if day rates stay robust and there is not rig capacity for them...well, they simply provide a contract to a driller and build one or two or three or more. Doing this will put them about three years out, or behind...but in the scheme of things, three years is just a small delay. Heck, some of these current newbuild rigs could have delays of a couple years...just watch. big