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

To: Big Dog who wrote (6741)	1/6/1998 3:32:00 PM
From: SJS	Respond to of 95453

Mike, I can't help but be reminded of our discussion with FGII at 45 or so, when you thought you made a bad call by selling those call options. Yes, getting 3 or 4 points of call money seemed great at the time, but WOW, FGII was a 22 just a moment ago. Scary how 50% of the stock value is now gone for many of these stocks. Were we that far off in our thinking about the valuations at that time? I came to the oil sector to cool off from the volatility of techs. So far, I'd be better off in UNPH, CIEN and RMBS.

To: Big Dog who wrote (6741)	1/6/1998 3:41:00 PM
From: pz	Respond to of 95453

Mike, <<<But why the write off? What is there to write off? Maybe they are realizing some losses from turnkey contracts in progress? There is no equipment to wwrite off. Turn key is simply a different way to get paid. Anyone have a idea on this?>>> It's possible that some of these turnkey wells cost RIG more money than they anticipated and that's why the write off. The driller takes the risk in a turnkey well and eats any cost over runs. If they had any hole problems or a multitude of other possible problems then RIG would have to eat the costs. In a dayrate scenario the operator takes all the risks and has to pay for any possible problems. This makes perfect sense for RIG to get out of these turnkey contracts. Paul

To: Big Dog who wrote (6741)	1/6/1998 3:46:00 PM
From: Czechsinthemail	Read Replies (2) \| Respond to of 95453

Mike, I think RIG's $12.6 million may be the amount they expect to lose from turnkey operations in the 4Q, which may or may not involve a write-off. It is possible that they have opted for a penalty to exit some of their turnkey operations sooner rather than later. The likely problem with turnkey operations for RIG and other operators is that costs have continued to escalate while the turnkey payment is a fixed price. As I suggested before, I think exiting the turnkey business is actually a good sign--an indication of strength in dayrates and the potential for high profits without as much risk. When the stock prices are headed down while profits are headed up, we are in the realm of increasing bargains. Though it is gut-wrenching to hold while they are down, they can bounce back quickly. Until you see some fundamental indicators of slowdown in the drilling business, betting on the comeback is the way to play it. Baird