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

To: Chuzzlewit who wrote (24496)	6/22/1998 12:11:00 PM
From: RGinPG	Read Replies (6) \| Respond to of 95453

I regretfully must say farewell to the thread. I certainly appreciate everyone's feedback & support over the last 7 months. Unfortunately I'm unable to continue in the stock market (buying individual stocks) because it has been unhealthy for me. This is just another one of those things I can't do. I still believe this is probably a low in the sector, so I plan on trading my stocks in for the Fidelety Select Oil Service Fund, and eventually trim my margin balance to zero. I may even consider diversifying a little (Europe looks good). I will probably close my brokerage account (so as not to be tempted again). Good luck to all of you. May God keep you well.

To: Chuzzlewit who wrote (24496)	6/22/1998 12:54:00 PM
From: Tulvio Durand	Read Replies (1) \| Respond to of 95453

Supply/demand is indeed the key to oil price as well as to day rates for our drillers. But as Baird said there's an important distinction between short-term (land and shallow offshore) and long term drilling contracts (deep offshore). RIG, for example, has deep offshore drilling contracts that stretch out to the next millennium. Those contracts are simply too expensive to cancel and to re-implement even if the price of oil remained under $12/bl for a year. Thus one would expect a looser connection of spot oil price to the valuations of RIG and ATW as compared to a tighter connection to valuation of PTEN. Tulvio

To: Chuzzlewit who wrote (24496)	6/22/1998 7:10:00 PM
From: Jess Beltz	Read Replies (1) \| Respond to of 95453

Chuzzlewit, I see. So, the price of oil and the drillers are reacting to the same thing, estimates of supply, and their prices move in the same direction, but for subtly different reasons: The price of a oil falls in response to an estimates of an increase in current supply, while The price of the drillers falls in anticipation of an extended environment of excess supply which will cause a decline in their business as the "expected" future unfolds. jess.

To: Chuzzlewit who wrote (24496)	6/22/1998 9:53:00 PM
From: pt	Read Replies (1) \| Respond to of 95453

Chuzz, re: "It has nothing to do with the price of oil per se", first of all, the price is dictated by the supply curve and the demand curve. You can't separate "supply," "demand," and "price," and say the reaction of the drillers' stock prices is attributable to just one, without considering the others. But price is probably the most important. Why does lotto sell more tickets when the jackpot is $50 million than when it is $8 million? If the payoff is bigger, you're more willing to take the gamble. Would you be more easily convinced to drop, say, $5 million to explore and develop a possible reserve of 1 million barrels if a) you'll be able to sell it for $12 million; or b) you'll be able to sell it for $20 million? Remember if the oil isn't there, you get nothing back. There has to be a large return relative to the risk to induce E&P companies to explore. Now if the price is at $20, and you are real hot to explore, so are your competitors. So as a driller, if I know there isn't enough capacity to drill for all the possible exploration folks, I can up my price, and, of course, make more money. So my stock price goes up. Paul