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

To: Broken_Clock who wrote (16536)	3/25/1998 6:58:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 95453

PK, the real key will be long-term interest rates, not the discount rate (although that has a definite effect); nevertheless, it's something to be concerned about. Now, as to the debt issue. I the companies have issued bonds, the interest rates are generally fixed, but if the debt facility is from a bank it is generally a floating rate of some sort (though the terms vary). IMO, the real issue in the debt equation is safety vs. the leverage effect of using debt to expand vs. equity. Would you rather have your favorite driller expand by merging with one of its peers through a pooling of interests (and pay approximately a 25-30% premium over market for the privilege) or borrow via bonds and run the risks inherent with leverage. To my mind, when a company chooses to expand using bonds as ESV did recently, its a bullish sign because it says to me that the company views its stock as "undervalued". Regards, Paul

To: Broken_Clock who wrote (16536)	3/25/1998 7:09:00 PM
From: MonsieurGonzo	Respond to of 95453

PK; RE:" OSX.X and SLB " ...we should probably move over to the Drillers thread, PK. (this posting was copied over from the Candlestick thread, as we should probably be in here with all the other Cowboyz and Cowgrrrlz) >...noticed the divergence between OSX.X and SLB ? Yeah - I see what you mean with the OSX.X and the SLB bellwether. They are in-sync with one another, but the OSX.X is definitely stronger-looking, with an UpTrend bias channel, wheras SLB is moving more horizontally. Reason is probably more fundamental than technical, Dave. There was a massive acquisition by HAL, I think it was; and the OSX.X includes the Machinery & Equipment boyz as well as the Services sub-sectors within the whole OSX.X I think SLB is not only big, but also integrated. When I was following the OSX more closely, I would divide the OSX.X index into OSX.D for drillers, OSX.M for Mach & Equip, and OSX.S for those stox in the Services sub-sectors of the 'composite' OSX.X ...I used OSX.* for the SLB bellwether, and did not include SLB in any of the sub-sector lists (which I got by combing through Yahoo's extensive database and... tscn.com ...you know, there are persistent rumours that SLB is/was a holding of Soros'. I read a little blurb the other day in the Herald Tribune that SLB landed the deal to provide all the services to the Russian giant, Gazprom or something like that - supposedly worth a billion $ over the term ?? - look at the SLB,W weekly candlesticks and dig that big-time Hammer last week on it, and on the OSX.X too. Question now is, will that window gap-up get "closed", or will it become a support from which to launch a recovery of the Oil Service Sector ? ...because CL98J oil futures look like they may go back below $14 without stronger evidence that this (latest) accord has "teeth". There was a Doji after long white candle yesterday, followed by a weak-looking hanger 'stick today: $14.75 is the window gap resistance that crude futures gotta bust through, it looks like -? -Steve

To: Broken_Clock who wrote (16536)	3/25/1998 8:11:00 PM
From: Lazlo Pierce	Read Replies (2) \| Respond to of 95453

Pappy and all, from Barrons On-Line tonight <<Wednesday, March 25, 1998 Looking for Hidden Oil-Service "Gems" By Vito J. Racanelli As the nightmare of $10-a-barrel crude appears to have been averted -- for now, at least -- some bargain hunters with cast-iron stomachs are shrugging off the risks that remain and have begun to look for hidden gems in the beaten-down oil-service sector. Crude oil prices bounced back again Wednesday on reports that big producers Norway and Russia were considering cutting their production. The announcement Sunday that Venezuela, Mexico and Saudi Arabia would move to cut total oil production by 1.6 million-2 million barrels a day caused crude prices and energy stocks to soar Monday before selling off again the following day. Nonetheless, if crude stabilizes at $15-$16 a barrel this year -- as many observers now expect -- it could limit the damage that has occurred since prices tumbled from $23 a barrel in late 1997. And though they've repeatedly slashed their earnings estimates, Wall Street analysts still expect earnings growth for many oil service companies to be around 20%-25% this year. With price stability still so shaky, some shrewd buyers are going out of their way to find oil service stocks that have something extra -- a company that looks profoundly undervalued or has a unique product. Like Tesco Corp., a small oil-service company with total market value of only around $500 million. It's also Canadian, and service companies domiciled north of the border usually sell at a discount to the group. Nevertheless, this relatively unknown firm is about to roll out an "underbalanced drilling" service that -- if successful -- could boost earnings significantly. Should the group move, Tesco will undoubtedly go with it, but the new service could offer downside protection -- and even some upside potential A few words on the science here. With conventional drilling, drilling fluids pressure inside the well must be higher than the underground formation the well is penetrating in order to prevent blowouts, among other things. Underbalanced drilling -- where the pressure in the well is kept slightly lower than that of the surrounding rock formation -- entails greater risk, but also does less damage and allows faster penetration, thereby saving time and money for E&P companies. Tesco senior vice president Martin Hall says that perhaps the most important characteristic of underbalanced drilling is that it can help increase oil recovery by "up to 20% or more," depending on the type of formation. With oil prices so low, every penny of cost savings counts, so not surprisingly producers are showing more and more interest in this type of drilling. Even without this promising new business, analysts figure that Tesco will grow its earnings by about 25% this year and next, about in line with the rest of the group. At Wednesday's close of $16 3/8 (in U.S. markets), Tesco is trading at about 20 times analysts' consensus estimates of 82 cents a share for 1998 and at 16 times 1999 estimates -- roughly in line with its traditional discount to its biggest U.S. competitor Varco International. (At $27 5/8 per share, Varco is changing hands at about 24 times mean earnings projections of $1.14 a share for 1998 and at 19 times 1999's numbers.) But projected profits from the new business could be an added kicker to Tesco's earnings growth rate -- pushing it up to 35% this year and next, some bullish analysts contend. Calgary-based Miles Lich of Peters & Co. -- no shrinking violet on this stock -- waxes enthusiastic about underbalanced drilling, calling its potential "huge." Tesco executive Hall says that in a year the new program could conservatively "add 20% to the bottom line." Indeed, though Hall won't confirm it, Tesco allegedly has been talking about underbalanced drilling with service giant Schlumberger and with Chevron, among others. Hall expects to have more details on a deal to market the service by the end of April. An agreement with a well-known company would "put Tesco on the map," he adds. Another small oil service company that some say stands out from the crowd is Trico Marine Services, Inc., the second largest provider of supply boats in the Gulf of Mexico. That's because Trico Marine shares have been beaten down to a "ridiculous" multiple of seven times First Call's mean earnings estimates of $2.75 per share for 1998 and only six times the $3.46 per share consensus for next year, asserts James Kaplan, a fund manager at J.L. Kaplan Associates in Boston. (When was the last time you've seen single-digit P/E ratios for anything?) Wednesday, the stock closed at $20 5/16, way below its 52-week high of 45 1/2. Kaplan's fund recently bought more than 400,000 shares of the company, and he isn't the only one who sees value there. Last month, Michael Price's Mutual Shares fund (owned by Franklin Resources) disclosed that it owned 1.88 million shares of Trico, a bit more than 10% of the company's outstanding stock. And Trico Marine insiders -- who were net sellers of stock when it was flying high -- began buying shares of the company this month, too. Kaplan claims that Trico Marine is selling at too big a discount to the group's bellwether, Tidewater, which trades at 11x 1998 estimated earnings and at ten times the consensus for next year. "[If] you sold off Trico Marine's boats one by one at current prices, you'd get a value of $32 per share for the company, " Kaplan asserts. Of course, nobody's planning to do that soon. And if the production agreement doesn't hold up, oil service companies are bound to be decimated in a new wave of price cutting. But if the going doesn't get too rough, Tesco and Trico Marine could offer some opportunities for investors who aren't afraid of what could be a rocky ride. >>