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Gold/Mining/Energy : Santa Fe International (SDC) -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (24)	11/18/1997 2:59:00 AM
From: Czechsinthemail	Read Replies (1) \| Respond to of 54

SDC has been trying to breakout but has not made it for near 2 mths. Actually SDC hit its yearly high of 57 early this month. Since then it seems to have been trading a bit weaker than some of its brethren. I suspect some of this may be uncertainties about the Middle East, where SDC has a fairly heavy presence, and the announcement of Apache's decision to terminate a contract. The result of that termination will likely be a new contract at somewhat higher rates very shortly, but people who don't look closely just see the headline and sell. Whatever the reasons, I think it has created a wonderful buying opportunity. I think that SDC is one of the most promising drilling companies going forward. Their predominantly international business should provide longer contracts with steadier and less variable results, particularly for their land rigs. SDC's margins and ROE have both been very high. Their fleet of harsh environment rigs--they have 4 of 13 in the world with two more scheduled for delivery--commands premium dayrates. The added kicker is the high percentage of rigs whose contracts come up for renewal in the near future. In this period of rising dayrates, each contract renewal boosts revenues, most of which find their way to the bottom line. This, plus the fact that SDC is newer and not as widely followed, may help explain its upside earnings surprise. I think there is a good chance for further upside surprises going forward as well. Finally, this stock is cheaper than other drilling companies. Some of this may be due to the high level of Kuwaiti ownership. On the other hand, SDC may be a buyout candidate since they are known to be interested if the price is right. Otherwise, you've got pretty strong hands holding most of the shares. I think the shares are a great buy, particularly at these prices. It is one of my two largest holdings among the drilling companies. Baird