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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 (20282)	4/24/1998 2:19:00 PM
From: Lucretius	Read Replies (1) \| Respond to of 95453

Yes (also NE has no semi's in West Africa) however, these deepwater jackups are a large part of NE's fleet. Yes, gas should help, but NE only has 5 rigs in the GOM. gas is not transported intercontinentally because of the storage exp, and the hot gas mkt is the US. Understand, I'm not saying game over for NE by ANY MEANS. I just think it may come down some. Hence, I have hedged appropriately. Additionally, you know my feelings on this mkt. A major mkt downdraft will take everything dwn initially, but the value plays will bounce back faster. -Lucretius

To: Broken_Clock who wrote (20282)	4/24/1998 2:54:00 PM
From: Czechsinthemail	Respond to of 95453

I imagine that NE still keeps jack ups so they can cover all bases but Day is certainly putting NEs future in the dep water stuff. Jackups are a BIG part of NE's business. The view that the company is predominantly into deep drilling and that their international business was somehow immunune to the softening dayrates in the Gulf has supported the stock while ESV and others seen as more vulnerable to softening dayrates in the Gulf tumbled. Now, with indications that the softening may be extending to other drilling areas, it may be time to rethink that view. As many have pointed out, the Gulf is the prime time spot for offshore gas drilling projects. International drilling is more focused on oil. IMO, the Gulf jackup drillers have been oversold and present a greater relative bargain. In the short run, this may result in relative weakness for NE and others that have outperformed, particularly given the big PE differentials between different drilling companies. Over the long haul, the way to bet is that oil prices will strengthen and drilling demand with it. It is conceivable that because NE's international contracts are typically longer than Gulf contracts, they may be able to ride out much of the softening dayrate period before their contracts come up for renewal. But in the meantime, I think the lower PE jackup drillers may outperform on a relative value basis. If oil prices continue weak, the dispelled belief that drilling demand would remain invulnerable during oil price weakness, may mean further pain for the drilling and oil service stocks. The long-term story should be a happy one, but it may take more roller-coastering to get there. good luck, Baird