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

To: marc chatman who wrote (23414)	6/4/1998 2:25:00 PM
From: Czechsinthemail	Read Replies (2) \| Respond to of 95453

Baird, when you talk about the rise and fall of oil prices and the uneven impact on the companies in the sector, are you talking about the short term impact on the stock prices, or the impact on earnings (which may not show up so quickly)? Both. The price movement is likely to be rapid in anticipation of impact on dayrates from a stronger oil price environment. The joker however is confidence in higher dayrates and higher earnings. I think the confidence is likely to remain with the companies with relatively higher deepwater exposure -- RIG, DO, ATW, FLC, NE, etc. even though the eventual impact on earnings may be higher for shallow drillers like ESV. The recent Smart Money article on Marine Drilling compared the impact on earnings if oil prices remained at current levels into the future. It showed MDCO increasing due to its deepwater exposure while ESV dropped slightly. I think the deep drillers and mixed deep/shallow will likely outperform unless/until there is enough increase in oil prices to create a much more bullish view on oil prices and drilling. A lot of people have been betting on the service companies as more stable and predictable alternatives to the drillers. This may be true unless it turns out they have been expanding capacity to increase supply while drilling demand remains relatively flat. Meanwhile most have higher PE's than the drillers that I think may temper their upside potential. It is the problem with PEG analysis -- it is only as good as the future earnings assumptions. I think both drillers and service companies will announce 2Q earnings that further reduce their already ridiculously low PE's. Baird

To: marc chatman who wrote (23414)	6/5/1998 1:24:00 AM
From: waverider	Read Replies (1) \| Respond to of 95453

Honest to God! You guys buyin' on a one day rise. >>As for the PE's of the service companies, I think the recent declines bring the PEG down to very attractive levels on many, and with earnings due next month, the PE's should be reduced another notch for many.<< Companies like FGII have higher PE's because they deserve it. Drillers have lower PE's because they deserve it. The market is pretty clear what it is saying. >>Well, let's hope in any event that the move holds. I'm watching a steady slide as I type this. I'm also not sure that we are seeing any fund buying (as opposed to speculating and short covering).<< Thank you, thank you. I covered my NE short this morning. And so you fools don't feel lonely...I bought more FGII and VRC today too. Oh my God, I've lost my mind. Now that I'm no longer short a driller (for today anyway), does everyone love me again? The Long One...no jokes please. (once known as Shorty...which he still is in terms of tech)