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

To: still learning who wrote (41533)	4/2/1999 3:45:00 PM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

<< the consolidation of E&Ps may well also pose a risk to drilling efforts. >> Re: risks to OS cos: ...I'm not entirely sure I follow what you mean. But, one great misconception in Consolidation, is that ''Fewer Players = less rig utilization.'' - not unless they find a way to get more boe per rig <VBG>... Fewer players doesn't lower the amount of Oil & Gas needed to meet Global demand. Actually I think Yergin & Cambridge (?) commented that the consolidation we are ''finally'' seeing is long overdue and that the entire energy sector benefits; as the remaining players will be bigger & stronger and more capable to ride out the storms... We will not necessarially see the dramatic swings in Cap Ex budgets due to Industry downturns in the future. Sure, there may be some cancellations as noted on the recent articles alluding to Vastar and their contracts with FLC & DO. However; do ''NOT'' discount the pending suits by Rowan & FLC etc. - these guys aren't building multi-hundred Million Dollar Rigs - putting their corporate survival on the line in FLC's case; with an unenforceable contract.... Once we see some huge setllements in the favor of the drillers - and we will (bank on it - the Majors all allready doing a 180 I hear) the cancellations will be a minor consequence in newbuilds. The contracts going forward will get stronger in favor of the drillers. Do you think you can contract with a builder to build a new house and then just cancel because home prices are declining and then not expect to get sued, to lose and to have to pay big $ ? The Oil majors don't either - delaying and negotiating were the end game here... This situation will not be forgotten going forward by the Drillers - all newbuild contracts going forward will be tighter than a ... ..... I also think the discussion acknowledged that fewer players allows greater pricing power on behalf of the Oil Majors & E&P's and the assumption that this would depress dayrates is also mooted by the point that if dayrates are depressed -- new Rigs and new drilling technology will be depressed as these new Rigs of late would not have been built in todays depressed dayrate enviroment. If these Rigs of late were not built - then the existing Rigs would be commanding higher dayrates because of reduced competition from newer, more technologically advanced rigs. So the equilibrium between major Oil/E&P's and Drillers will most likely continue to follow the ebb & flow of Oil prices... re: demand: << I think there is a risk of small demand reduction right now due to price >> I do not think the demand for Oil & Gas is going to be depressed because of current prices. Current prices are ''STILL" well below recent norms ... Airlines and Trucking companies will pass along to customers any unforseen spikes in prices.. The present situation isn't riskless, or euphoric by any stretch of the imagination; but the less than positive sentiment is actually our best friend here imho... good luck.