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

To: Fredman who wrote (37688)	2/18/1999 12:45:00 AM
From: A. Fineigler	Read Replies (1) \| Respond to of 95453

Fred, I totally agree that DO and RIG look like steals at present. Like many on this board, I've been gradually selling off other oil holdings to buy deep water plays - esp. RIG, because they seem to be the purest deep and very deep water play (deepest rigs and highest proportion of deep rigs in fleet). As others here have pointed out, it is a wonderful way to get tax losses while staying in the sector. I've been sniffing around PGO lately - seems to have incredible volatility, even for this sector, so may be a great trading stock while this long cycle plays out. What do you think of PGO as a deep water play ? AF

To: Fredman who wrote (37688)	2/18/1999 12:52:00 AM
From: Razorbak	Read Replies (2) \| Respond to of 95453

OPEC's Dilemma <<I have read so many posts from people saying this or that will cause it to turn around, that OPEC is doing something, that Venezuela is doing something, that Asia's economy is turning around, which will in turn help the Oils, that Saudis cannot afford to sell oil at the price it currently is: that THEY will force something to happen. But NOTHING has happened, and it doesn't look like it will for awhile. I think we here are all smart enough to know when we smell change coming, and i don't think we even have a sniff of it yet: and it isn't going to happen overnight.>> Fred: IMO, OPEC faces two challenges at present that prevent it from acting in concert. The first challenge is a classic dilemma known as the "cartel problem". As with any cartel, despite all the agreements and quotas in the world, there will always exist, in the short-term, a significant incentive for individual players to cheat on their production targets (i.e., they make more money in the short term if everybody else cuts back and they overproduce). This problem is intractable. History, economics, and game theory have proven this to be fact, and the problem will always exist as long as there are cartels in any industry. The only viable solution in this game is for one of the stronger players (e.g., Saudi Arabia) to punish the cheaters (e.g., Venezuela, Nigeria, et al) by dropping prices through the floor for a long enough period of time to re-instill discipline in the cartel. The second problem is more strategic and relates to OPEC/Non-OPEC market share. The simple fact is that most, current, non-OPEC production is still economic at todays depressed prices. (Hard to believe, but true, especially with the last decade's increases in exploration and development productivity.) Unfortunately for OPEC, any move that the cartel makes to reduce OPEC production will quickly be filled by non-OPEC production, often forfeiting hard-won market share to the competition. Given what happened in the 80's, none of the OPEC players want that to happen. Hence the cartel is between the proverbial rock and a hard place. Stay tuned. You think things look bad now? Just wait... It may get REALLY interesting soon. All the best, Razor