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

To: Steve Childs who wrote (9300)	1/22/1998 6:09:00 PM
From: waverider	Respond to of 95453

Steve, about CDG: I posted this on 1/12...it confirms what you found out. Diamond H ---------------------- I decided to call Cliff's Drilling Friday afternoon. I knew they were bored and that NO one had called them about their business lately :) I talked to Cindy Taylor, Controller. Nice lady. Texan drawl and all. First the revenue/operation stuff... -40% of their operating rigs pump natural gas. These are primarily in the Gulf. -60% pump oil. -15-20% of their revenue comes from turnkey operations (fixed contracts to drill a particular well). -80% of their revenue comes from dayrate contracts. Now the current earning situation... -there are continued increases in dayrates for rig leases as we speak (write). -their customers have made their budget plans based on $17-$18 a barrel. -if there is a continued downdraft in the price of oil, we're talking 6-12 months, then some of the smaller oil companies may have to cut back on exploration. -the "lion's share" of Cliff's contracts are with larger corporations. -FWIW, recent estimates are that oil will average $18-$19 a barrel in 1998. -the company is very comfortable with current quarter earning's estimates (since the quarter ended in December, they have a good idea what is going on). -they are also comfortable with analysts 1998 earnings estimates and have planned their budget according to similar projections. The only question is the price of oil and how long this current fall will last. No analysts downgrades to speak of except for the major oils. From all I can see, 1998 should be a stellar year because most of the contracts are locked in through that period and day rates continue to increase. I don't get it. Oil is a commodity, but this current situation seems very different to me from the semiconductor nightmare a couple years ago. There were downgrades all over the place and excess capacity. Rigs supply is VERY tight and will not improve for at least 1-2 years.