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

To: VLAD who wrote (40538)	3/21/1999 9:17:00 PM
From: Razorbak	Read Replies (2) \| Respond to of 95453

FLC and the Altman Model <<This Altman analysis is only a model.>> True. I never represented it otherwise. Nevertheless, the Altman model has proven consistently accurate over the period of time since its development. The original samples in Altman's research displayed accuracy of 95 percent based on data from approximately one year prior to failure. The accuracy dropped to 72 percent based on two-year data. Subsequent tests on firms that have gone bankrupt since 1968 have shown a predictive accuracy level of 73 percent and greater on one-year data. <<It totally ignores the fact that in the drilling sector the price of oil is the biggest force effecting a company that is highly leveraged as is FLC.>> Correct, but research confirms that the vast majority of firms fail because of internal factors (e.g., poor management or fraud) as opposed to external factors (e.g., commodity price moves or recession). <<I don't see a lot of middle of the road here. Either FLC goes bankrupt(I don't see that happening now that the price of oil has moved up and appears to be going higher) or the brains behind FLC have probably managed the most creative leveraged financing in the history of the drilling industry.>> That's pretty common for companies that are highly leveraged. High risk, high reward. Debt only leverages the underlying fundamental operating condition of the company. If the fundamentals are healthy, then heavy debt will increase the equity returns for shareholders, and vice versa. <<FLC will shine in 99 so long as the OPEC players don't have a short memory and don't start cheating once oil starts hitting the $18.00 level. Hell we went from $10 to $15 oil in a very short time span. $18 is just around the corner. I think these countries realize the importance now not to cheat as the price of oil rises. I also think the bigger lesson is that they budget their economies on a pessimistic oil price so that they are not forced to sell cheap oil just to make ends meet.>> Well, that I can't agree to just yet. The jury's still out IMO. Thanks for your comments. Razor

To: VLAD who wrote (40538)	3/21/1999 9:38:00 PM
From: Captain James T. Kirk	Respond to of 95453

OPEC Urges Compliance With Oil Cuts By BRUCE STANLEY AP Business Writer VIENNA, Austria (AP) -- Iraq Oil Minister Amer Mohammed Rasheed minced no words in summing up the goal of OPEC ministers meeting here this week. ''We are here ... to save the situation of the collapsing prices of oil. That is our main objective,'' Rasheed said Sunday. OPEC ministers expressed hope that oil-exporting nations would abide by production cuts designed to slash total output by more than 2 million barrels a day. The new quotas, which are to begin April 1, would remain in effect for a full year, Venezuelan Oil Minister Ali Rodriguez said ahead of Tuesday's meeting of the Organization of the Petroleum Exporting Countries. The meeting is expected to result in formal approval of production cuts agreed upon earlier this month. Excess supply and a weak demand for winter heating oil sent prices plunging to 12-year lows late last year. Although consumers have benefitted from cheaper oil and gasoline, the soft market has inflicted economic pain on producers, including Britain, Norway and the oil-patch American states of Texas and Louisiana. Prices finally began surging two weeks ago, when representatives of OPEC's three biggest members -- Saudi Arabia, Iran and Venezuela -- along with Algeria and non-member Mexico agreed at a meeting in The Hague, Netherlands, to reduce output. On the New York Mercantile Exchange, crude oil for April delivery has traded in the $15-range. In comparison, crude was trading at about $12 a barrel a month ago. Under the deal reached at The Hague, Saudi Arabia, which currently produces more than 8 million barrels a day, will take the biggest cut -- 585,000 barrels. No. 2 producer Iran will pump 264,000 fewer barrels a day, while Rodriguez confirmed that Venezuela will trim daily output by 125,000 barrels. Saudi Arabian Oil Minister Ali Naimi, speaking after arriving at a hotel, said he expected full compliance with the new, lower levels of production. OPEC estimates the current output of its 11 members at 27.66 million barrels a day. At this level, supply exceeds demand by about 500,000 barrels, according to the Paris-based International Energy Agency. The success of OPEC's effort to buoy prices by pumping less oil depends upon the compliance of each member, Rodriguez said. Cheating has been a chronic problem for the group. Libya, one of the last OPEC members to confirm the size of its planned production cut, will pump 96,000 fewer barrels a day beginning April 1, said Libyan Oil Minister Abdalla Salem El-Badri. ''I hope that everybody will abide by the agreement,'' El-Badri said. More ministers were scheduled to arrive today, when delegates were expected to meet in small groups of two or more prior to Tuesday's group meeting. Non-OPEC members pledging to reduce production include Mexico, Russia, Oman and Norway. --------------------------------------------------------------------------------