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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Czechsinthemail who wrote (2695)	11/4/1997 9:43:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 95453

Good morning Baird. My opinion on Varco's profitability is based on a reading of their construction backlogs and the lead-time to build rigs. According to what I've read, day rates are still not high enough to support the construction of new rigs. Apparently, much of the current constuction is being undertaken to replace aging existing rigs. So as day rates continue to increase I expect an explosion of new construction. Therefore, if I'm reading this correctly, the capacity of the drillers is limited by the number of rigs. I'm also invested in ESV. I have no doubt that the deep-water drillers represent excellent investments, and from an investment perspective as opposed to company priftability (i.e. increase in stock price) may do better than VRC because of the tremendous rise in VRC's price over the past six months (+165%). To my mind, the other consideration is that eventually the deep-water drillers are going to need new rigs which will lead to heavy capital expenditures. Baird, in the last six months this has been by far the best-performing sector of my portfolio, and it held up very well during the market down-draft. Regards, Paul