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Gold/Mining/Energy : Trico Marine Services (TMAR) -- Ignore unavailable to you. Want to Upgrade?

To: MarkM who wrote (491)	6/27/1998 12:33:00 PM
From: Daniel M. Whipple	Respond to of 1153

Mark, The general consensus of the market is that the price could approach its lows or even take it out. My personal opinion is that no matter how many similar cuts the producers announce, as long as the storage tanks are near capacity the price will continue to fall. A quick resolve of this situation would be for all producers to cut production by 50% for a short period of time, say a month or two, then gradually increase. Also,the published price of oil is just a bench mark. I would bet that there is a lot of discounting going on. The true price is well south of current levels. The Saudis must be very upset. If cheating goes on, then look for the Saudis to open the flood gates and will be selling 12 mbd (of course that will be after their accountants have seriously shorted the oil service sector and longed the airlines, trucking, and utilities. JMO

To: MarkM who wrote (491)	6/27/1998 1:10:00 PM
From: D.J.Smyth	Respond to of 1153

<<I think OPEC will slow the degradation down and we may see a trendy mild upturn in the not too distant future. But somehow gut feel tells me we're close to the bottom>> reading the WSJ article on Thursday about the cuts it was interesting to note the comments of the Kuwati oil minister in which he basically challenged the shorts to go ahead and short more, cause they'll soon see that oil prices will rise and the OPEC is firm in its resolve. the problem appears to be with Saudi Arabia. during the gulf war they increased production to offset the lost production of Iraq. but the war is a bygone and Saudi's production levels have continued even while Iraq has openly trucked oil across the Turkish and Jordanian borders in violation of the UN agreement. The Saudis need to cut production to former levels to help the price of oil to move above $17. Thus far they've been unwilling to do so. According to the WSJ article Iran is upset about it. as for Jefferies and TMAR, Jefferies cuts the earnings in TMAR by over 35% (the lowest of any analyst now) which would correspond in a revenue reduction of about 28% over previous predictions or a revenue reduction of over 20% for the remainder of the year. Yet (a) utilization has remained above 80% in the gulf and nearly 100% outside the gulf, (b) day rates in the gulf have fallen about 10% ($8500 average to $7500 average) (c) TMAR has about six new boats coming off drydock for the latter half of the year and moving into production which should have the affect of increasing revenue 10% to 15% in the gulf (those boats assigned to such), (d) new competitive boats entering the gulf for the latter half of the year are, for the most part, a very small number and are already contracted (TMAR is the second largest in the gulf behid TDW). So, Jefferies is estimating that TMAR's revenue for the latter half of the year will drop by nearly 17% from current levels. Since 40% of TMAR's revenue comes from outside the gulf (and that number will increase during the latter half of the year) with that revenue stream remaining stable given the deepwater rigs serviced mainly in the NorthSea and the few in South America, then you must assume that the Jefferies analyst assumes revenue for TMAR in the gulf to drop by over 40% which is incredulous (60% -17% = 43%). And it seems the analyst is giving no provision for a decrease in debt service. It doesn't add up. Day rates in the gulf would need to drop to around $5500 to $6000 to support this earnings picture and stay there for the remainder of the year. The likelyhood of that happening is very small. Oil prices would need to drop below $9 to support such a scenario. you've got to wonder about the credibility of the analyst at Jefferies. three months ago Jefferies put a buy recommendation on Radisys after it had fallen to $35 with glowing words about future earnings, design wins, blah blah. one month later RSYS announced that they would miss earnings. they've pre-announced poor earnings twice since then. this isn't an isolated example. i don't follow Jefferies much, but i do recall this incidence.