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

To: Douglas V. Fant who wrote (24287)	6/17/1998 8:28:00 AM
From: marc chatman	Read Replies (2) \| Respond to of 95453

Doug, perhaps you can help clear up an issue which has been bothering me. Several posters have been hoping that a further OPEC production cut will bring supply down and increase the price of crude. I believe their thinking is that the higher price of crude will stimulate drilling activity and day rates. But is this really the case? Is it the price of oil which drives E&P budgets and, thus, drilling activity? Or is it revenues for the E&P's which cause them to adjust their drilling budgets? If it is the latter (my intuition tells me it should be), then selling substantially less oil at higher prices doesn't do much to increase revenues. And, if revenues are down, won't the amount budgeted for new drilling also stay down? I'm thinking that there needs to be both good demand and firm prices to support growth in drilling activity. If we get only the price increase, then any resulting rise in stock prices may be a selling opportunity, as opposed to cause for rejoicing. Am I off base here? Will higher crude prices, at lower sales volumes, cause the oil companies to spend more on drilling? A few people on the thread have been focusing on demand (PL, and maybe a couple of others), and they are making a lot of sense. Maybe we are at or near a bottom (I doubt it), but it could be a year or two before growth gets back on track.

To: Douglas V. Fant who wrote (24287)	6/17/1998 8:35:00 AM
From: HH	Read Replies (3) \| Respond to of 95453

Thanks Doug for your input recently. It helps immensely to have someone as involved as you to give your perspective. I have a friend who I have spoken of before who is a self professed bottm feeder in production (properties in La). His pain was obvious earlier this year. but I expect any day to hear some bad news from him. One thing for sure, they are a scrappy bunch. HH

To: Douglas V. Fant who wrote (24287)	6/17/1998 3:48:00 PM
From: Sunny	Read Replies (3) \| Respond to of 95453

Doug, If you ask the CEO of any of the majors would you rather have $20/bbl, $15/BBl or a jab in the eye with a sharp stick he will take the $20 price. Because the refiners can pass along the increased crude price it does not affect their net as much as the increase in crude price. This time last year when oil was above $20/BBl most oil companies were reporting record profits, rig utilization was at all time highs and the service companies were raising prices and also reporting record revenues and profits. And best of all Stock prices were up substantially. The fall in oil prices has driven all of the good things away, and I think it is time for us to adapt, improvise and find a way to survive. Sunny