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

To: Swede who wrote (10930)	2/7/1998 12:44:00 PM
From: Chuzzlewit	Read Replies (6) \| Respond to of 95453

To the thread: some general thoughts about the sector. I am far from an expert in the oil services sector, but I have been troubled by the lack of explanation for the extreme volatility of the stocks and the relatively low P/E's they trade at. Maybe it's been published, but I haven't seen it. It seems to me that the combination of the supply-demand imbalance, projected increases in oil consumption, and the long lead times required for off-shore rig construction would lead to stock valuations trading at much higher P/E's, and barring those high multiples, I would have expected much less volatility owing to the fairly well-defined earnings potential of these companies. The best I've been able to come up with from a fundamental point of view is the parallel to the dd's, whose prices have fallen by as much as 60% since their recent highs as a result of overbuilding fabs, and consequent overproduction of disk drives. This analysis posits that we will have an oversupply (rather than a balance) of rigs in a few years. Extreme investor uncertainty would then create volatility. If this scenario is correct, do any of you oil specialist have a suggestion as to what leading indicators might be useful to us neophytes? The alternate hypothesis is that there is a tremendous amount of churning among traders and market timers which is either creating the volatility or augmenting it. Do any of you have any thoughts on these issues? Regards, Paul