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

To: SliderOnTheBlack who wrote (26485)	7/25/1998 12:18:00 AM
From: P.Prazeres	Respond to of 95453

Slider, With all due respect...the bullishness you protray ignores one VITAL point. What if oil averages under $14.00 throughout 1999? It seems as though the "patch" is being traded assuming this scenario. If sub$14 for 99 is the case, many of the smaller cousins and those with higher debt will literally sink...no ifs or buts about it. Your arguments are valid IF and only IF crude recovers to $16 to $18 by 1999...only at those prices will drilling activity and dayrates start to get back to last year's pace. The only way crude gets back to $16 to $18 is with complete OPEC compliance, not 75%. And according to some sources, 100% is not going to happen, meaning that supply is still going to be higher than demand, which isn't bullish. The US is accepting 20 million barrels into its SR tanks because the private tanks are full...that just adds to inventory even though the weekly figures may not show it (because the tanks are full). In the meantime, companies are for the most part working off thier old contracts...some are coming up for renewal soon (ESV is an example)...it seems that the new dayrates aren't that great. If crude is sub$14 by 99, most of the other contracts will be rolling over into a very depressed dayrate structure. This is the reality that anyone invested in this sector must realize. To paint this as a rosey picture is a disservice to the new readers and to the old timers. Paulo