Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Chuzzlewit who wrote (10946)	2/7/1998 4:18:00 PM
From: Teddy	Read Replies (3) \| Respond to of 95453

RE: "So, it is for all of these reasons that I believe the key issue will be oversupply of rigs." Paul, you are a god. As best as my mortal mind can tell, you are saying that it is best to short the drillers. Good idea, if your goal is to lose money. OT Big Dog, if you have a few moments a way from your new job, would you please take a bite out of Paul's leg? ALL: I'll Be Back Monday.

To: Chuzzlewit who wrote (10946)	2/8/1998 1:08:00 AM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

Paul, I'm not sure that there is a good connection between day rates and the demand for oil. There is apparently strong correlation between dayrates and consumption of oil and weak correlation between dayrates and the price of oil. Though possible weakness in Asian countries puts some uncertainty in the demand picture, most assumptions are for growing oil consumption over time. And the long lead times to produce rigs make it unlikely that we will see an overcapacity any time soon -- unless the demand for the rigs falls precipitously. The most likely area for such a falloff in demand would be the land-based projects where you have shorter term contracts that are easier to shelf. The least likely area would be the ultra deepwater projects, which have the desirable combination of highly favorable drilling economics and long multi-year contracts. This is one of the reasons the drillers most heavily involved with these deep drilling projects carry a somewhat higher PE -- they have better earnings visibility going forward. Baird