Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Broken_Clock who wrote (25193)	7/7/1998 12:51:00 AM
From: SliderOnTheBlack	Respond to of 95453

PapayaKing - ''Blasphemy'' ie: a 30% haircut... The oil business is NOT shutting down or disappearing ala the dinosaur... Per the earlier post, exploration & production will actually increase this year over last. Undeniably, these stocks are tied to crude prices for now. For now; being the key word. In every cloud is a silver lining. Perhaps the only way we will ever see the technically justified de-coupling is for some of the oil driller & service stocks to keep making solid earnings for a couple of quarters directly in the face of $12 oil. Even if we are in a ''new paradigm'' of market-maker driven oil prices...with OPEC being impotent to effect market change; we will see new technologies like 3 & 4D seismic, the technologies used by CRLBF (very hot lately) and the ultra deepwater arena being the future with the deep drillers like RIG, DO & FLC and deepwater service companies like CXIPY & SCSWF becoming future stalwarts... perhaps we will see dramatic consolidation; especially in the weaker market segments like land drilling - where a focus to natural gas is all ready naturally occurring. Perhaps the highly leveraged, financially weak will perish or be forced to consolidate. The low cost, financially strong will grow and survive. The E & P companies are continually making leaps forward in technology, continually lowering their production costs. The technology driven companies will continue to flourish, even in the face of a fudamental shift in crude prices; which I do not think we are seeing, or will see for some time to come. My point is merely, that the oil industry will adjust technologically and consolidate to a profitable level - they have to; oil can not be explored for, discovered & drilled for, pumped - piped and transported at a financial loss to all segments of the chain. The natural balances of supply, demand and cost will occur. One rationally has to be bullish on the long term increase in demand for crude and its related products as we enter a new era of the modernization of Russia, Eastern Europe, China & Indonesia, Mexico,Central & South America and Africa... This contraction in the oil industry will in fact possibly cause a delay in the needed expansion and modernization of infrastructure, equipment, plants/fab & shipyards and R & D projects in technology which may set up a ''rubberband'' effect; inducing mass shortages of crude and the infrastructure to meet demand... how many rigs have been built lately, how long will major deepwater or land seismic surveys be put off for, how many R&D projects have been or will be shelved... I think the E & P companies definitely understand their historic cycles and for these very reasons we will not see the doom & gloom predictions transpire. This is not to say that we will not see lower dayrates, stacked rigs-lower utilization, drydocked boats and cancelled contracts... I just feel that this is all ready priced into these stocks. Hope so... looking forward to that ''party'' about this time next year; Lord knows - we will have earned it... We need to be patient here; OPEC & Ridayh pact members will become ''born again'' if at the end of Q3 or Q4, we still see a supply glut and weak Asian demand.. IMHO, Q1 1999 will be the latest we will have to wait to see the tide turn. The majority of these companies will still make lots of money in the coming 2-3 quarters... we will never see CDG at a PE of 3 or RIG with near 50% EPS growth coming from long term contracted deepwater projects at a PE of 12, especially when compared to the DOW average PE... there comes a price/valuation disparity level in relation to the rest of the market where sector rotation will occur... In my opinion, it is a ''classic'' contrarian time to buy - when ever the news is worst, predictions most dire, prices at historic lows, talk of new paradigms occur etc. - is the time to step up to the plate and take some swings... The analogy to the Bank Stocks of 1990-1 and even going back to look at the pulse of the oil sector when we were at historic bad times... should cue us to remember that we either must learn from history and capitalize on the patterns and opportunites it presents to us or be destined to repeat it... Oil Patch shoppers we now have a ''Blue Light'' special in aisle 3 ! That EVI, CDG, FLC & FGII be looking mighty good to me ! I went back and looked at some of the gains off the post January & March selloffs... for those who warn against trying to catch ''falling knives'' I think you need to go back and look at those 10-15% 1-2 day pops in some of the majors--- trying to catch a ''superball'' on the bounce up may be a lot harder than catching a falling knife... we now have stocks like FLC and others that are 10% below their prior January and March selloff lows - with their online deepwater/long term contract capacity coming online right around the corner at a PE of 8-9 times 1999's dramatically downward revised earnings ? Come on - classic, market over reaction...oversold and over doomed & gloomed. Emptying the piggybank right now for the leaders; CDG, EVI, FLC, FGII need not go any lower - I'm estatic to be buying at these levels right now. Saw EVI bounce $2 5/8's last thursday - only to selloff $3 today (the next trading day) -- lots of nervous pent up demand out there...