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

To: upanddown who wrote (12717)	2/24/1998 2:07:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 95453

John, perhaps if people stay focused on the reasons why they invested in this group (as opposed to speculated), this thread would become less manic. From a purely fundamental point of view, I would think that principal drivers for profitability in the sector would be the number of barrels pumped, the current shortage of rigs, and the need to replace dwindling oil reserves. All of these indicators are strongly bullish, and haven't changed. Regards, Paul

To: upanddown who wrote (12717)	2/24/1998 2:30:00 PM
From: RGinPG	Read Replies (1) \| Respond to of 95453

Do you know what WTI oil is? I don't, I'm asking, but it generally runs about $2 PB lower than the NYMEX light sweet crude quoted in the more recent charts on that webpage. Which means if we get down to $14.5 PB or so we will be at lows not seen since 1978. Of course, these are not inflation adjusted numbers. Actually a Light Sweet crude price of $20 today is equivalent to the lows reached in 1986 of $14 Light sweet crude ($12 WTI) seen on the chart (assuming inflation of 3% per annum). Being pretty much a contrarian, I see this at good news. That these companies can remain profitable even while oil is at historic low prices (inflation adjusted prices anyway) reflects on the excellent ability to maintain profitability. Of course, I'm sure there is a limit to this ability. However, oil cannot stay at these prices for much longer (can it?). Want to here something else that may sound silly? I think it is a good thing for these stocks that the Iraqi situation resolves peacefully. I'd like to see these stocks increase in value to match their fundamentals, not because of temporary fears of war and destruction of reserves. We'll get much less volatility this way, and the stocks will move up on their own merit.

To: upanddown who wrote (12717)	2/24/1998 2:40:00 PM
From: dougjn	Read Replies (1) \| Respond to of 95453

Peg for oil drillers is a basically flawed analysis. That is because assuming that the last year's earnings increase, or even the projected increase one year out is absolutely not indicative of longer term growth rates, say five years average, which will be much lower. A reasonable multiple to apply to 98 earnings is the five year forward growth rate, or probably better, three to four years from the end of 98 on out. It is quite difficult to estimate that growth rate. I use 20% for most of the larger offshore drillers. Its a wing. That still makes them pretty attractive .... IF oil prices return to the high teens or better. I'm afraid they won't for at least six months. Because I'm afraid the Saudis have a lot more to loose by say cutting production 1 million barrels than to gain from a higher price. Of course if all producers cut just a little bit they would all gain much more than they lost. But that ain't the dynamic these days especially. Doug