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

To: Tulvio Durand who wrote (15066)	3/17/1998 1:45:00 PM
From: marc chatman	Respond to of 95453

>>The lost revenue can be offset by increased production, and indeed Venezuela et al are doing just that. And more oil must be drilled to meet the increased production demand. So falling oil prices should be good for oil drillers and rig builders.<< Not necessarily. There is a limit to which lower prices can stimulate demand. Businesses already at full capacity are using as much fuel as they will regardless of whether prices move lower. Perhaps people will drive more with lower gas prices, but to a point only. And there is the point that e&p companies laden with debt, and with lower cash flow to service that debt, will be forced by creditors to cut back on drilling projects. That is Merrill's point, and a good one.

To: Tulvio Durand who wrote (15066)	3/17/1998 1:51:00 PM
From: Broken_Clock	Respond to of 95453

Tulvio- here's how I understand the theory of Supply & Demand. Too much supply equals falling prices. the missing link in the current puzzle is this(IMHO): How long can over producers continue at this pace before their reserves dry up to the point where they HAVE to slow down. I don't think the price matters as much as the quantity of reserves...as far as drilling more holes. Venezuela can also rely on barges and shallow water boys and land rigs so their over production future looks bright. This will keep the pressure on Nigeria, Qatar, etc. OTH, Norway has cut production this year. Smarter, stronger countries see the long term picture. They are "drill & hold" long term term investors. The mo mo producers will dry up eventually and the economies of these countries will be with out oil at the worst time. The current political leaders are corrupt, therefore, lining pockets is the name of the game. As bernardo said, Ven. can't stop the pumps because of the internal situation. I am sure it is no different any where else in the third world. It's hard to see a recovery before next winter, for me. We could always have some "event" like war to turn things around. That's about the only thing I could see to change this market. PK

To: Tulvio Durand who wrote (15066)	3/17/1998 2:43:00 PM
From: Czechsinthemail	Read Replies (2) \| Respond to of 95453

Tulvio, Your point that falling oil prices will stimulate demand and ultimately increase production and the need for more production is well-taken--up to a point. On the positive side, it should help Asian economies get back in the saddle, and it depletes existing reserves at faster rather than slower rates. On the negative side, it crimps exploration budgets for the smaller E&P companies and it may present psychological hurdles around undertaking major projects. The "surprise" out of this wailing and gnashing of teeth period, is that the offshore drilling companies will continue to turn in extremely strong earnings. What we are seeing more than anything else is a projection of fear into the future. Since I know you're familiar with that from following CYMI, you know the territory. It makes for great opportunities for those with the patience and the bucks to buy when the prices are down and hang on. Baird