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

To: Big Dog who wrote (14032)	3/6/1998 9:07:00 PM
From: John Carpenter	Respond to of 95453

Since 95% of the world's unexplored offshore acreage lies in water 3,000 feet and deeper, deep water floaters have more promise than jackups and the market reflects this. Bob Rose and Michael Talbert do have different strategies- Chevy vs. Mercedes Mike-you'd have to admit that a Mercedes has a higher margin than a Chevy.

To: Big Dog who wrote (14032)	3/6/1998 9:11:00 PM
From: stevedhu	Read Replies (1) \| Respond to of 95453

Dear BIG DOG, now you tell me. I took your past advice and with the help of a friend of mine who does calls all the time, and makes a good living at it, and did my first one on MDCO today. I was however concerned about the merger idea, so I only used half of my holdings for the call and got $ 2.50 for Mar. 20 calls. If it takes off I'll miss a little but still get some to, so I won't complain either way. Hope you had a good week. How were things at the Royal up in Dallas? Steve

To: Big Dog who wrote (14032)	3/7/1998 1:47:00 AM
From: SJS	Read Replies (1) \| Respond to of 95453

DOG, You're comments are right on. MDCO is defying everything (TA, stochastics, BB's...etc) ...as stocks do when there's rumors about them. Being a disciplined trader, I did a buy/write with known objectives and a great return valuation within the context of the buy/write. I might be re-evaluating this write in light of the "wave" in progress. If this this goes to low 30's (as a poster mentioned to me), I might leave a lot on the table from current levels. Here's a new way to look at it. Compare the downside risk, to upside potential. If MDCO were to drop to 17 with no deal (it's a good support level), that's 5 points downside. If it were to run to high 20's or low 30's, that about 8-10 upside. That works for me. So...I can leave the current write in place, take a healthy percentage on existing long shares, and re-establish a new open long position at current levels. Or...buy the current call back at a loss, and stay long with original shares. Not sure yet what I am going to do. Let me know your thinking on the swirl around MDCO. Regards, Steve

To: Big Dog who wrote (14032)	3/7/1998 4:01:00 AM
From: Czechsinthemail	Respond to of 95453

Big Dog, There are a number of points you raise about the profitability of jackup and older, shallower floaters. One of the interesting stats I noticed is that I think RIG has the lowest price/book and the lowest historical return on equity of the major drilling companies. My take on this would support your view that other companies have made more money off their jackups and older floaters. But that analysis does not fully reflect the dynamic, evolving situation at these companies. Because RIG has the highest percentage of long term contracts, much of its fleet is earning at old contract rates, while companies with shorter term contracts move up to higher dayrates faster. This makes them more profitable in the short run, but eventually as RIG's contracts get rolled over or extended at higher dayrates, their growth and their return on equity will be much greater. You can see this in the dramatic growth in estimated earnings for RIG going forward. They will particularly outperform in a climate of slowing or flat dayrates, because their move up to these higher rates lags the other companies. Another difference between DO and RIG is that RIG is committing itself to a much more ambitious expansion program with several new rigs coming on line within the next few years. With a less aggressive building program, DO's present earnings may seem stronger, but their forecasted growth rate is lower going forward. Trying to determine the future earnings potential of the different companies' fleets and then bringing it back as some kind of present value for the stocks is the trick. As you go further forward in time, RIG's earnings potential looks better. I think this is what supports the company's higher PE. Baird