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

To: marc chatman who wrote (43078)	4/23/1999 8:46:00 AM
From: Aggie	Read Replies (2) \| Respond to of 95453

Marc and Ian, howdy, Interesting comments, and an interesting strategy on the part of RIG, to take their rigs off the table with recovery so close. Ian, in your post (43073) you string two interesting comments together: On today's RIG cc, Talbert made clear that RIG will stack -- cold or hot -- rather than work below cash break even. Approximately seven rigs bid a Terra Nova job, including two of Transocean's, and RIG refused to bid below six figures. Well....which rigs were bid? I find it a stretch to believe that Transocean has rigs which have operating costs in the six figure range. As a rule of thumb: Older 300 -350' jackups have operating costs in the $10 - 12K range, second/third generation semi's have operating rates in the $30 - 40K range, and newer 4th generation semi's are up around $50K. I can't give you ideas about these newbuilds coming out of the shipyards, maybe someone from StarFleet Command can jump in here. My guess would be around $65 - 70K, max. Of course, these rates must also include additional charges to cover building costs. My point is that we shouldn't lose sight of market conditions as they existed a few months ago. Rig rates were artificially high when taken in proportion to operating costs, all as a function of activity, demand, and availability. As an investor in drilling contractors, I was chortling, but as the customer, I was crying the blues. This was not a condition of long-term stability, and it would be a mistake to set these conditions as a goal to necessarily be met and exceeded in the next upturn. Remember: the same rig which is going for $35K today went for $90K in '97 and $50K in '95. My guess is that the more heavily leveraged contractors - i.e. R&B - will hustle to the table and lock in some contracts, and be in a better position to ride the wave up. JM$0.02. Good Luck to All, Aggie