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: MikeM54321 who wrote (32184)	11/28/1998 12:32:00 AM
From: VLAD	Read Replies (2) \| Respond to of 95453

I agree with your point. If both Exxon and Mobile will still be serving the same customer base for demand how would this reduce their need for drilling and exploration? I can see how a merger can drastically save on SG&A expenses but I do not understand how it would decrease the expendatures on this sector. IMO the only thing that matters is supply and demand and currently supply outweighs demand. The silver lining in the current situation is that the small players will either have to be bought out or go under and as this occurs the industry will become leaner and meaner and when oil prices do rebound those left standing will be positioned to reap the profits.

To: MikeM54321 who wrote (32184)	11/28/1998 11:31:00 PM
From: Aggie	Read Replies (1) \| Respond to of 95453

Mike, hello Been there and done that, so I can give you a little insight on the process. The first thing to get cut will be administrative in nature: Surplus offices will be closed, and the staffs will be combined and consolidated. Admin. staff: HR personnel, secretaries, IT people, and technicians will be let go next as office space diminishes. Technical (engineering) and management will first be decreased by both attrition and VR. Most of the experienced, hence marketable, people will take VR packages amounting to $100K ++ and go immediately to their next job, which has been pre-arranged during the pandemonium surrounding the merger. A few of these will return to the company later as $1000/day consultants, and stay on the payroll for years. The exploration effort will change by virtue of economies of scale. The geological picture comes into focus much quicker when the takeover target's data room is opened up. This makes geological prospects easier to identify (Need more data! More input!) and hence initially decreases the total number of wells drilled. In long-term reality however, nothing will change on a grand scale, although the new company may drill a few less wells overall, it won't be enough to make much difference - they still are out to make money, in my opinion, and will still be governed by the laws of the marketplace. This is a phase we are going through...... in the 60's, oil companies owned their own drilling rigs until it became clear that it was no longer profitable to do so. So, my take is: mildly bearish short term, no effect to beneficial effect long term. Aggie