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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 (17044)	3/29/1998 1:08:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 95453

Big Dog, actually, you are confusing profit with cash flow, and there is a big difference. The only thing that profit is good for is figuring out your taxes (which affects cash flow) and getting some gurus(?!) very excited. The financing decision effects cash flow because of interest payments and sinking fund requirements, but only the interest affects cash profits. So... Profit = Leasepayments - expenses - interest - taxes. Cash flow = profits + depreciation - debt repayment. Now, a really savvy CFO tries to minimize profits in order to decrease taxes. This is done by depreciating assets as rapidly as possible. But when it comes time to publish the annual report s/he takes the opposite tack and tries to maximize profits by depreciating assets as slowly as possible. This gives rise to timing difference which you will find on the balance sheet labeled "Deferred Income Taxes". This way you can have your cake and eat it too. Higher cash flow from slower recognition of profits for the feds, and higher profits for the investors. I hope this is clear. Regards, Paul

To: Big Dog who wrote (17044)	3/29/1998 8:39:00 AM
From: diana g	Read Replies (1) \| Respond to of 95453

Re: Low Cost Asian Rigs--A Possibility?? Uncle Big and Thread, please forgive if this is a foolish question--- Is it possible that low cost Asian steel and labor are providing someone the opportunity to build at much lower prices and thereby hasten the day when rigs will be overabundant? best regards, diana

To: Big Dog who wrote (17044)	3/29/1998 7:32:00 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

Big Dog, If your idea is correct and the drilling companies can look down the road and see another overbuild coming, presumably they will try to apply the brakes and pay off debt so that they can be flush with cash at the time of the cycle top. I would assume that this process would impact builders like FGII the most. As near as I can tell, there isn't an enormous amount of new building going on currently and the recent weakness in oil prices has diminished the likelihood that a build-fest will soon begin. Baird