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

To: Crimson Ghost who wrote (33164)	12/18/1998 9:48:00 PM
From: Tomas	Read Replies (2) \| Respond to of 95453

Oil-Service Firms Face Tough Times By KATIE FAIRBANK AP Business Writer DALLAS (AP) -- Oil services companies, which build and maintain drilling rigs, have been among the hardest hit in an industry hammered by this year's downturn in crude oil prices. While most eyes have been focused on the massive mergers and job cutbacks among big, diversified oil producers, the services sector has also been severely impacted as budgets for drilling equipment and services are slashed. Angie Sedita, an oil-services analyst for the A.G. Edwards brokerage, calls it ''a year of carnage'' for these companies. With big oil companies taking in less money for every barrel of oil sold, they have been looking for ways to keep costs down. In addition to signing merger pacts and eliminating jobs at their own companies, they have also been cutting back on orders for equipment and maintenance, the bread and butter businesses of oil service companies. With less demand from the oil and gas producers for oil-field work, the services companies have been making deep cuts in their own work forces. Recently reported cutbacks include 8,100 jobs at Halliburton Co., 5,600 at Schlumberger Ltd., 3,500 at Baker Hughes, and 2,500 job losses at Weatherford International Inc. Oil producers say that for some wells, it just doesn't pay to continue pumping. ''It's costing as much to get oil out of the ground right now as we're selling it for,'' said Morris Burns of the Permian Basin Petroleum Association. ''Nobody is going to go out and drill for $8 oil.'' Don Galletly, a vice president of Houston-based Weatherford, agrees. ''They'll limit the number of services they'll do to a well unless they see the price per oil getting better,'' he said. In an effort to hold down costs, oil-service companies are also merging. Weatherford International was formed in May by a combination of EVI Inc. and Weatherford Enterra. Halliburton Co. and Dresser Industries Inc. has gotten Justice Department approval to merge as long as the company divests some divisions. In May, Baker Hughes Inc. announced it would merge with Western Atlas Inc. The grim situation is a contrast to the buildup in the services industry that occurred during 1996 and 1997. At that time, the oil and gas service industry experienced a general improvement in product demand and pricing due to a strong world economy, which helped increase exploration and development. That means there are more jobs around today that must be cut. Despite the cuts, few insiders have rosy views for next year, even if prices go up due to hostilities in the Persian Gulf. Most analysts say they expect spending on oil services to continue to fall. ''We think the near term is probably going to be similar to this year,'' said Galletly of Weatherford, whose company saw its stock price fall from over $50 a year ago to $17.25 Friday. biz.yahoo.com