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

To: Brent Hogenson who wrote (42030)	4/11/1999 12:21:00 AM
From: Douglas V. Fant	Respond to of 95453

Brent, If you do nothing to oil wells,their decline rate will fade only marginally 5-8% annually. Gas wells decline much faster average 33% annually. Mid/deepwater rigs cost 60,000 day maintenance. Shallow water rigs are more in the 25,000/day range. onshore rigs are lower still, in the 12,000/day range for costs. So if drilling is not occurring, you can do a few minor things to "goose" production rates such as open the choke valve a little wider downhole,etc.- fight off the inevitable decline for for a year or two. But eventually yes your production rates have to fade- faster in gas than in oil.....

To: Brent Hogenson who wrote (42030)	4/11/1999 5:23:00 AM
From: Razorbak	Respond to of 95453

Supply & Demand <<I don't buy that theory razor. Worldwide demand increased appprox 400,000 bpd in 1998. The increase in demand slowed but that is not to be confused with overall demand slowed.>> Brent: I was referring to a reduction in expected demand, not absolute demand. Expected demand dropped like a rock in the last 18 months, and especially in Asia due to the so-called "Asian Flu". At the time, Asian demand was expected to boom, and OPEC even raised their production targets to accommodate this expectation. IMO, OPEC's decision to raise production, along with the UN's decision to allow Iraq to increase production for humanitarian reasons, in combination with the dramatic drop in expected demand, are the major factors that precipitated the recent price drop. <<That means that since these rigs are no longer working 2,466,420 bpd of production (6,666 * 370 rigs) is no longer making it to the market.>> You are confusing drilling and production. The majority of working hours spent drilling worldwide are non-productive (pun intended), since they result in dry holes. Therefore, it is erroneous to multiply the number of rigs out of work by your hypothetical production rate requirement to estimate the impact of these lost rigs on worldwide supply. Hope this clarifies. Razor