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Politics : Idea Of The Day -- Ignore unavailable to you. Want to Upgrade?

To: Judy who wrote (13514)	11/3/1997 7:46:00 PM
From: Rare Bear	Read Replies (2) \| Respond to of 50167

Judy, as per your request, I will give my prospective on the oil and gas drillers and field services. First, the land drillers in west Texas and Eastern new Mexico are experiencing a small boom. They have been able to book most of their rigs with at least six month contracts with the large operators. Drilling activity remains quite strong going into the fourth quarter. There seems to be a surge in activity as operators try to spend their fourth quarter budget. Also, we should see earnings continue through another quarter. But, an expected turn should occur after the first of the year. I will be glad to continue to monitor rig count. Profitability factors: Drillers have been able to shift the drilling risk to the operator... Convert from footage bids to daywork contracts.Let me explain. Footage contracts-the driller has to accept some of the drilling risk because they are paid by the foot. Now, more and more contracts are daywork only. They are paid by the day without any risk of drilling the hole..contracts have increased to $6,500.00 per day for a rig plus a charge of $20,000 for the move in and out. This does not include water, mud, bits, pipe, cement and logs. Currently, to drill and complete a well under normal circumstances to a depth of 12,000' will cost approximately $900,000.00 The reason for this is simply supply and demand. The industry has entered the early stages of a multiyear event to meet anticipated growth in the U.S. demand. To complete a well, there are many specialized service companies that supply the completion details from the point once the hole is drilled. These companies have the ability of attracting large growth valuations.. I like the companies that have a great reputation and have been forming alliances with the majors oil companies. (i.e. SLB, HAL, WAI, BJS, TBI, ICO, KEG, PESC, DI,...I have limited my stock picks to companies in which I have had direct contact with respect to price increases and utilization. My favorite: WAI My personal opinion of this ability to raise drilling prices and services are directly tied to the stability of the oil price. Obviously, should the price or the market change, valuations will act accordingly. This is a short fundamental look at a very large picture. I realize that I have skipped a very important area in this sector.. "Deep water drilling" I will tell you my opinion. August 27, the Gulf of Mexico lease sale (leases 10 yr. Term) saw solid bidding on tracts which require drilling in water deeper that 2500'. This has stimulated the need for better technology and capability to seismically evaluate and drill in this depth of water. The spark seen in conversations, upgrades and new construction of deep water rigs, be it vessels or jackups, will continue into 1999 and 2000. There are less than 50 rigs capable of drilling in this depth at this time. Favorites: CDG,ESV, RIG, FGII,CKH I wish CNBC would stop playing the IRAQ CRISIS..this is a non-event and the market obviously should and/or will not react. Oil up only a few pennies today after constant hounding by the media. I wonder everyday what the unscrupulous MM will throw at us tomorrow. Doug