Nope. Nothin. I live in St. Louis and have thought about dropping by but what would I say? "Hey you guys gonna beat your number or what?" Here is a related article. This is from thestreet.com (earlier this evening) which I highly recommend(www.thestreet.com). 6 bucks a month (after a 2 week free trial - you do not have to give a credit card to try it) Hopefully this news and thurs. earnings will liven up MAVK a little tomorrow.
Day Rates Show Signs of Softness, but Pricing Remains Solid
By Mavis Scanlon
Staff Reporter
4/14/98 9:33 PM ET
Global Marine (GLM:NYSE) and Rowan Companies (RDC:NYSE) reported solid earnings, but there are signs of softness in the near-term market for jackup rigs in the Gulf of Mexico.
Weak oil prices remain a focus of the market, but with each passing week drillers argue that the near-term problems will give way to gains later this year or early in 1998 as supply once again grows tight.
Global's CEO Russell Luigs says any softening in day rates is more of "a dip of modest duration," and that Global is still getting above-market day rates for its fleet. Part of the reason for softness in the market for jackup rigs that drill in 200 to 300 feet of water, he told investors on a conference call, is that the major oil companies, which had been the primary contractors of these rigs, have begun focusing on deepwater projects faster than independent oil companies have taken up the slack in the more shallow water depths.
The latest Offshore Rig Locator, which tracks rigs and day-rate contracts, shows a $2,000 drop in the bottom range for both the 250 feet and the 300 feet class of jackup rigs in the Gulf of Mexico. In March, the day-rate range for 250 feet jackups was $34,000 to $42,500. In April, it slipped to $32,500 to $42,000. Similarly, for 300 feet jackup rigs, the March range was $55,000 to $65,500, while in April it was $53,000 to $65,000. The Locator tracks contracts over the past three-month period.
Industry observers don't view this as a problem unless, first, oil prices do not firm considerably by the end of the year, or second, natural gas prices fall from the $2.50 range at which they are presently trading. In Tuesday's NYMEX crude oil trading, futures for May delivery settled at $15.12 per barrel, down 20 cents. Tom Marsh, a drilling analyst with Offshore Data Services, says it's way too early to anticipate what will happen.
"What's happened is that the market is fairly well in balance in terms of supply and demand [of equipment]," Marsh says. "We were going to have that regardless of what oil prices did. It's not a growth situation, but it doesn't have to be because companies are making money off rigs." There's not one rig in the world's offshore market today that's losing money, Marsh says, in explaining the supply/demand balance of the rig market. That's fine for the companies, but how about from an investor's standpoint, someone who seeks continued growth from his investments?
"The rig companies are in a lot of ways between a rock and hard place," Marsh answers. "They have no control over the thing that sets prices in their market." They can grow revenue by adding drilling capacity, but then the question remains whether oil prices can support any new capacity that's coming on, he says. Look for rigs to move out of the Gulf in coming months as contracts are typically longer and day rates are higher internationally, Marsh says, which will help tighten the market a bit on the supply side.
So far, the number of rigs affected by any softness in rates is very small, Marsh added. But the Gulf market is where we'll see the most volatility, Marsh says, since in the shallower depths the contracts are relatively short term.
Kevin Simpson at Merrill Lynch says he has built in somewhat lower rates -- up to 8% on the high end -- for all the offshore drillers as contracts roll over in the Gulf. "Our judgement here is that jackup rates have some additional risk, but there is no meaningful decline from here."
At Global, the threat of continued weak oil prices is there, but it's not overwhelming.
"In 1998 any weakness we do see in the market would affect earnings but it wouldn't cause a major change in our earnings," says Dave Herasimchuk, Global's vice president of marketing. Consensus estimates call for GLM to earn $2.02 per share this year. "If oil prices continue to trade at $15 in 1999, by that time we'd have a lot of contracts coming up, and our rates might go down," Herasimchuk continued. "Are we worried about it? Sure, we worry about it all the time. But I don't think anything is going to happen." |
