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

To: Challo Jeregy who wrote (20436)	4/26/1998 9:49:00 PM
From: Douglas V. Fant	Respond to of 95453

Challo, We just had a hell crank thunderstorm on the southern plains. In fact lightning put out the power as I has just written this reply (Might improve how this NEC Computer works!) .... My guess is that day rates will slip a bit- nothing goes straight up or down, and man! They've improved tremendously over the last three years... But I'm guessing that they won't slip a lot. And most service companies used the first wave in this energy up cycle to improve balance sheets, which will lower the cost of doing business. So my guess is that a 5-10% slippage in day rates will not have a huge impact on drillers profits margins. And of course the well servicing, tubular companies are even exempt from that analysis. Bottomline is this- I work for a major oil company- and we intend to double the number of exploratory wells drilled for the next three years as compared to the previous three-year period. Since energy companies generally follow the same path with a minor twist or turn, my guess is that other majors are doing the same- as will many state-owned oil companies. Allright- let's say that lower oil prices condemn 25% of the prospects in your exploratory portfolio, and you chuck them.Still that's a 66% increase in exploratory wells drilled over a three-year period.... So might we go downward a while-sure. Might we go downward for the next six months? Heck I don't know-maybe. Will we go downward over the next three years- highly doubtful from what I see in terms of world energy demand and drilling programs..... Finally note two things: energy up and down cycles usually run in long multi year cycles...We're just getting started on this upcycle. And second since the 1859 Titus, Pennsylvania oil discovery that kicked off the modern oil era, the price of oil has dropped steadily in real dollar terms (as have many other commodities) for 130 years. But oil companies are still around- and making good profits. Need to look at the cost side of the equation too... Sincerely, Doug F.