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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 (23894)	6/11/1998 8:41:00 PM
From: Big Dog	Read Replies (2) \| Respond to of 95453

Let me tell you cookies a little something that may soil your britches. There REALLY ain't no such thing as a long term contract. "Say it ain't so, Your Honor!", the crowd roars. Dig this scenario... Oil prices are at current levels for a long time...or lower. (I don't think this will happen.) ABC Major Oil Company has a deepwater drillship on charter for 5 yrs at 200,000 clams a day with XYZ driller. Utilization is weak...rigs are available. Day rates have declined. ABC calls XYZ to the office and says, "You know, I really like your rig and your company. But I can't hack this big ole day rate." The drilling dude starts sweating in the 70 degree office. "How 'bout you say we cut this rate down a smidge to say about 125,000. And just to show you how much I like you, I'll take two of your smaller rigs on charter for a year or so at market prices." Driller dude is in a jam. Does he say f*** you and the pipeline you slid in on..."we got a contract by God and if you don't honor it I will sue your black gold JR Ewing ass". ??? (Keep in mind that the customer base of this driller dude can be counted using the fingers of one person and that it is unlikely he will want to cut off one of those fingers that he may need later on.) The more likely scenario will be..."Well Mr. Oil Company, how about if we make that $127,500?" Point of this little story is to say that when you have a handful of customers that you are dependent on forever, you can not risk never doing business with them again. So pals, there ain't no such thing as Santa Claus OR long term offshore drilling rig contracts. No oil price, no tickie...plain and simple, end of story. So sayeth the dog.