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

To: The Ox who wrote (32525)	12/6/1998 11:43:00 PM
From: Douglas V. Fant	Read Replies (2) \| Respond to of 95453

Michael, The failure of the Lehman analyst is this: There are two sides to any equation- both supply and demand. Demand for services may drop yes. But if I do not know the supply equation well, I cannot price a service....Look at computer makers. The average price of a computer has fallen- yet so have wholesale component prices that box makers pay for components that go into the computers. Thus profit margins have remained the same while retail prices have dropped.... And indeed I want to be a lone voice in the wilderness and say that the mega mergers in the oil industry will actually be good in the long term for OS stocks- why? For a fundamental reason that I can see being inside the energy industry that financial analysts cannot. Sure demand may fall a bit for services initially due to the consolidations, BUT and here's the kicker: These big mega companies do not like working with funky local contractors on critical tasks. Thus the SLB's,HAL,'s, etc. of the OS world will be pulled by these big companies into their far flung projects all over the world-i.e. they'll have more business. Let me give you an example. Typically offshore helicopters are serviced and overhauled after each 1,000 hours flight time. Well I once rode a chopper over the South China Seas and I asked my PRC Chinese pilot how often the CNOC serviced these choppers. He said. "Oh whenever they break down!" So when I got back shoreside, I went and checked maintenance records- wow! These guys were flying helicopters 2,000-3,000 hours flight time with no maintenance! Well guess who got replaced by an American Tranportation Company? The point being is that these mega mergers will actually open up more of the world's OS business to the top OS companies.... Sincerely, Doug F.