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

To: jbe who wrote (23145)	6/1/1998 4:06:00 AM
From: Chuzzlewit	Read Replies (2) \| Respond to of 95453

Good morning JBE, As you can tell from the time of this posting I'm a bit of an insomniac. I thought I'd pass on to you and the rest of the thread some comments from Value Line about some oil patch stocks I own. 1. ESV - they suggest that earnings momentum will be slowed by the weakness in oil prices, and they have reduced their earnings forecast by a dime to $2.45 for 1998. They point out that the long-term outlook is still favorable, and the company is taking advantage of this by building its asset base. The base is expected to increase by $500MM and will be completed in early 1999. ESV has entered into a contract with Keppel Fels to build a $130MM international class harsh weather jackup, scheduled for delivery in 2000. ESV is adding three new barge rigs to its Venezualan fleet. VL concludes that the shares offer attractive long-term appreciation potential ($50-$85) for the 2001-2003 period. They expect that lower oil prices will pressure day rates in the near term, but the long term fundamentals look very good. The usual caveat: these shares are best suited for risk-tolerant investors. 2. GLM - VL expects GLM's dayrates to remain high reflecting the rising demand for deepwater rigs. They expect West Texas Intermediate to rebound to $17-$18/bbl, and contract drilling backlog to rise to $1.5 billion next year, 40% of which should be completed by yearend. They continue to believe the stock has a lot of long-term potential, and is predicated on West Texas Intermediate rising gradually over the next few years. Earnings are forecast at $1.90, up from $1.53 last year. Target prices are $35-$55 for the period 2001-2003. Only for the risk-tolerant investor. 3. VRC - VL is very bullish on Varco. They point to the need to upgrade and convert rigs for harsh environment conditions. The backlog is up significantly ($600 MM compared to $463MM at the beginning of 1998). Management believes that most of the backlog will be shipped this year suggesting strong earnings momentum. VL forecasts earnings of $1.15/share, up from $.76 last year. In order to keep up with demand they are expanding their capacity. Lower oil prices has no impact on Varco's business. Most rig construction and upgrades are for explorational, deepwater drilling, and the decision to drill is based on the life of the well, not current energy prices. They believe that the current price of the stock is an attractive entry point, and they forecast target prices of $35 - $60 for the 2001-2003 period. This stock is not for the faint of heart. TTFN CTC