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

To: Chuzzlewit who wrote (25979)	7/19/1998 3:27:00 PM
From: Elmer	Read Replies (1) \| Respond to of 95453

Chuzzlewit, very good point. I have heard some very knowledgeable analysts saying that this recent downturn may be a blessing in disguise for the long term success of this industry. They mention about how we were on the edge of some huge capacity and infrastructure increases when oil prices started to fall. Perhaps this most recent falloff will result in companies within this sector being a little more cautious in adding capacity when things turnaround. Perhaps, they will more strictly enforce requiring a return on their investment of at least 15%. I realize these guys like to grow their asset base through newbuilds, but maybe we will see at least a little hesitance to build new assets without receiving higher dayrates due to the recent downturn. Elmer

To: Chuzzlewit who wrote (25979)	7/19/1998 4:07:00 PM
From: Big Dog	Read Replies (3) \| Respond to of 95453

Chuzz -- The drillers have the financial muscles NOW. If there was sufficient demand for rigs to cause oil companies to enter long-term contracts, there would be no problem for ABC driller to build another rig. Like I said in the newsletter, drillers can only grow two ways: 1. More rigs. 2. Higher day rates. The companies can have more muscles than Venice Beach and it won't make a hoot of difference if oil prices are low. Higher oil prices solves most everything. But even higher oil prices won't raise day rates past the cost of newbuilding. What we better hope for and keep a close eye on are discoveries in deep water. The deep water market is unique to itself as there are so few rigs that can compete -- but more are coming. No deep water discoveries, and you have a 300 million dollar floating asset working in jackup territory for 30,000 a day and proud to get it. What do you think that would do to a company like RIG ? Chapter 7 here we come. FWIW, here is a link to a story about oil prices from Forbes from June 15. Stories like these are a dime a dozen...like I say, nobody can predict. forbes.com big jump.to