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

To: Thean who wrote (17513)	4/1/1998 6:09:00 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

Thean -- I think the strong finale is likely to be carried over into tomorrow. The question at this point is how the drilling companies will play with respect to the crude oil market. Today's trading suggested some uncoupling -- the buying seemed predicated more on a bargain-hunting acquisition of value stocks more than bullishness on oil prices. I've been thinking about how the companies may trade given different oil price scenarios. 1. If oil prices continue to weaken. If oil prices drop further, the best place to be(next to the sidelines) would definitely be offshore drillers and probably the deep drilling companies. Land drillers are not the place to be because these companies will feel the marginal drilling cutbacks first and most seriously. RIG would be my first choice, followed by DO. 2. If oil prices remain relatively flat. Here the best place to be is likely to be the offshore drillers, with perhaps greater return to be found among the shallow drillers or mixed shallow/deep drillers that have lagged a bit relative to the deep drillers. ESV would be my first choice, followed by GLM. 3. If oil prices move up significantly. In this case, the land drillers or some of the smaller E&P companies are likely to be the star performers, followed by shallow drillers. Since I'm less confident that this scenario will pan out, my selection process for this one is the same as #2. It offers better downside protection in case oil prices start up strong then fade. While today and recently, the #1 strategy has worked best, I think going forward the #2 strategy may provide better returns. If oil strengthens, you will get much more bang for the buck. If oil weakens, the recent lagging of the shallow and underperforming mixed shallow/deep drillers should provide a fair amount of downside cushion sufficient to match the #1 strategy unless oil prices go into a major dive. So are you back in and what do you like? Baird