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

To: Gottfried who wrote (25139)	7/4/1998 1:28:00 PM
From: Chuzzlewit	Respond to of 95453

Gottfried, its all a matter of supply and demand. What has been sorely neglected is the fact that the demand side of the equation for the drillers and fabs depends on the rate of depletion of pumpable oil. Since the Asian meltdown, the anticipated rate of oil demand has been cut significantly. Drilling activity is off only because of the slower than anticipated draw down of oil. If much new rig capacity has not been brought on line, and if a significant number of existing rigs are close to being retired this will drive up dayrates to astronomical levels once oil utilization increases to its previously anticipated levels. The lag time required to build a new rig will ensure the fact that day rates continue to climb for some time to come. I continue to see the real danger to the sector in terms of an oversupply of rigs in the future. I don't know the elasticity of demand for rigs, but I would think that it is quite inelastic when rapid depletion of existing fields looks like a real possibility. The softness we've seen recently in the dayrates and utilization probably portends a lowered rate of contracting to build new rigs which would mitigate this fear. TTFN, CTC