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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 (18737)	4/10/1998 9:28:00 PM
From: RGinPG	Read Replies (3) \| Respond to of 95453

No, these are not definitive lowered rates, these are just guesses by Simmons based on lower oil prices. <Oil company spending trends along with recent new contracts and bids indicate that day rates for 350' IC jack-ups in the GOM are likely to decrease from the low $70k's to the low $60k's. The fleet of 300'IC jack-ups are predicted to decline from the mid $60k's to the mid $50k's.> <Our analysis is based on the assumptions that the current softness in day rates is short lived (three to six months) and that it is contained to the GOM.... We remain bullish, etc, etc." I don't know where they get this from. They must be talking about the GOM since they said "limited to the GOM". Land rigs are the only ones that have had definite decreases in day rates that I have seen. Unless these guys have access to data that no one else has, they are guessing. Can anyone else substantiate this softness in day rates in the GOM? All the news about oil company spending is steadfastly that their E&P budgets have not decreased, but may decrease in the future if the price of oil continues to fall. And: <Our adjustments were based in the following day rate assumptions for the various classes of jack-up rigs in the GOM. 350' IC Q2-$62.5, Q3-$62.5, Q3-$67.5, 1999-$75 300' IC Q2&Q3-$55, Q4-$60, 1999-$65 250' IC Q2&Q3-$47, Q4-$52, 1999-$57 200' IC and smaller: day rates not to exceed those assumed for 250' IC rigs If I remember correctly, the recent GOM bidding was surprisingly positive. These guys are guessing. I don't know Simmons, but I assume they are more knowledgable than the rest according to your post (they gotta be better than Merril Lynch). But they are still guessing, based on the current price of oil. I have seen NO hard evidence for actual lowered rates in the GOM or anywhere else in the ocean. Has anyone seen any real evidence of lowered day rates in the GOM? Have I missed something?

To: Broken_Clock who wrote (18737)	4/11/1998 2:37:00 AM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

PK, Downward revisions are based on the assumption of softening dayrates. These, in turn, are based on the assumptions of less demand for drilling in a lower oil price environment. When I last talked with ESV's IR and asked about how dayrates and utilization looked, they said they were continuing at full utilization and dayrates in the Gulf for the 1Q were higher than during the 4Q. I think what the Simmons report is addressing is the possibility of softening dayrates. How it will actually play out isn't clear. But I think ESV will show very strong 1Q earnings. Going forward if dayrates are softer, their year to year growth rate may slow. But even here, any softening of dayrates is likely to be very short-lived. As I've pointed out countless times before, shallower drillers will more sensitively track the ups and downs of drilling demand because their contracts are shorter. But given the pronounced selloff of ESV and other shallow offshore drillers, I think the recovery potential may be greater than for companies like RIG. Once oil prices begin to rise, ESV will be reflecting that improvement much faster than RIG does. ESV should do fine. They will have one of the strongest earnings reports, and the downward earnings revisions have already happened. Given a price that discounts virtually all the negatives and the likelihood that future surprises will be positive ones, I think ESV looks poised for a recovery. Baird