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

To: Teddy who wrote (10266)	1/30/1998 10:29:00 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

Teddy, Thanks for the post. I've also heard some discussion about softening among land drillers with various spins put on it ranging from deferred exploration projects to regional shortages getting worked out (apparently the Gulf area has had higher rates than Oklahoma). Shorter contracts make land drillers more susceptible to discontinuity. My view is that drillers are best played for the long term, since they will go through all kinds of ups and downs while there are abundant fears of falling oil prices. Once that gets stabilized, investment money will rush back in to fund exploration projects and to purchase shares. If you are going to play it for the long term, the most predictable drillers are offshore and among these the deep drillers as the article details. The land drillers are more of a speculation that may pay off big if land drilling re-accelerates and becomes capacity constrained. The land drillers have certainly sold off enormously from their highs and may be great values unless those old highs were way too high. But land rigs are easier and cheaper to produce than semisubmersibles, so the land cycles are likely to be shorter. We may be seeing hints of that now. The oil markets are pretty schizoid right now around the ebbs and flows of the Iraq situation, but I think they are showing some signs of basing. Seasonally, February is a likely time for prices to bottom out, so we are likely near if not past the lows. The impact of all this on deep offshore drilling budgets and company earnings is likely very small, but the impact on share prices can be big. That's why at the end of the day you could buy RIG for $3 a share less than yesterday. No real difference in the company's business, but you can make an additional 7.5% just on its return to yesterday's price. I think it will be back there early next week. Baird