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

To: Gary Burton who wrote (35682)	1/22/1999 11:37:00 PM
From: Big Dog	Read Replies (4) \| Respond to of 95453

re FGI -- Here is my reply to the well written post you reference: Bob -- Great write up on FGI. I can see you understand the business quite well. I would like to point out a couple of things you may have overlooked. 1. The repair, refurb and upgrade business is no small potatoes. In fact, this is much higher margin than the construction of new rigs. FGI loves this work, and it will always be needed to keep the aging rig fleet in good order and able to work safely and meeting the eveer-increasing demands of oil companies. 2. The aging fleet. Just as oil reserves are finite and depletion slowy but surely drains the available supply -- accelerated depletion when production is shut in due to low oil prices and lack of exploration -- offshore oil rigs have a finite useful life. Drillers will do everything they can to extend the rig life (which means more work for FGI), but eventually the rigs must be retired. The fleet is old. The newest bunch of jackups were built around 1979-81, making them about 20 years old. The older they get the more attention they need. Eventually this rig fleet will experience an increasing rate of attrition and need to be replaced. (That day is not today, but it will come.) 3. Don't forget about the huge deepwater development market that lurks around the corner -- FPSO's, TLP's and other varied offshore structures. They all must be built by someone -- why not FGI? The MMS is a hair away from approving FPSO's for use in the US Gulf of Mexico. 4. There will always be special situations for rigs to be built. There are three rigs (semis) right now that FGI would be the clear choice for construction. Those rigs alone total upwards of 500 million, and they WILL be built. (And be built in the US due to attractive Maritime Administration loan guarantees.) 5. FGI is becoming the "go-to yard" due to reliability and quality work. No one wants to take chances with cost overruns and delivery problems. While I agree with most of what you said, I think the above factors need to be considered as well. I think FGI will outperform all of the drillers. Then there is that nagging short position...beats me what that is about, but it amounts to about 24% of the float (as of six weeks ago -- likely less by now I would think). Just my two cents. big loosbrock.com