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

To: Razorbak who wrote (37544)	2/14/1999 3:03:00 PM
From: Mike from La.	Read Replies (2) \| Respond to of 95453

Razorbak, That is a very good point you raise about production costs of oil, '80's vs now. If I understand you correctly, you're saying that lower production costs will keep up supply, even during a historically low oil cost environment. Would you care to comment on the following thoughts? Production costs are lower now, but not across the board. The extreme example is the high cost stripper wells we hear so much about. but aside from that most land wells are more expensive than offshore, etc. Only the most recent wells had the new technology advantages, but there are many older fields out there. Of course they may have already recaptured a lot of their costs. Would it be a reasonable to assume that only very low cost fields will continue to have activity, but higher cost will not? Would you care to speculate where the drilling activity might continue under these circumstances? The next issue would be, how much would the low cost production offset the cut backs in high cost production drops? My generally uninformed guess is that deepwater drilling is where the companies are looking for the kind of low cost production they need in order to maintain market share. I think in the oil business it's expand or die. How does all this jibe with your observation?

To: Razorbak who wrote (37544)	2/14/1999 8:43:00 PM
From: Sergio H	Respond to of 95453

<Last year, due to technology (e.g., 3-D seismic and directional drilling), the cost of finding, developing and extracting a barrel of oil was $5.50/barrel.> Razor, I was wondering how much of the cost reduction was due to scaled back spending from the big companies and shutdowns from the small independents. It's hard to imagine oil prices going higher for a substained run right now. Spring is around the corner. Asia's woes continue. Yet, have you seen Chevron's estimated price of a barrel of oil on average for 1999 ? $13.50/barrel. Is it wishful thinking on their part ? I've seen other estimates calling for $5/barrel. Amigo Sergio