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NMS - Neptune Marine Services

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Michael,

I personally feel very comfortable with a reasonable investment in this company. The six companies that were acquired were all profitable and had big name customers in O&G. There is incentive in it for all previous owners of those companies, as they all have shares in NMS and are also contracted to stay for about 3yrs each. They all were obviously very knowledgeable in their own fields, Lange having worked for Schlumberger(one of the worlds most technologically advanced service companies in O&G), is well suited to recognise quality. The only risk that anyone has spoken of, is amalgamating them all together. Given the previous points, the likelihood of it failing is very low, I think! If you read back and catch up on articles in Smart Investor, Smart Company, Fin Review, WA papers etc; the terms used to describe NMS suggest a incredibly bright future. Also the large US company Apache has used them through Cal Dive, and continue to use NMS directly. Cal Dive wouldn't like giving out their work either, but given NMS have NEPSYS, the cost and benefit left them no choice. Just after listing about 3 1/2 yrs ago, Halliburton's subsidiary,KBR, used them at least twice to fix Marina infrastructure at Darwin's Cullen Bay. Australian Navy has used them a few times for varying jobs, fixing infrastructure, paint a sub underwater and weld up hulls. They are the first company to weld stainless steel underwater.There is a growing list of reputable companies that have used NEPSYS. NEPSYS gives them an incredibly good edge at getting work. The technology is proven, insurance companies and welding standards rate it as the best available for underwater use. The alternative is hyperbaric welds and drydocking, which incredibly expensive.

You obviously are well versed in shares, I think if you do your research you'll be hard pushed finding negatives. I don't think projections into the future are much more than a lucky dip, the forecasts don't include contracts not gained, but would be based mainly on the incomes of the acquired companies prior to joining NMS. The work using NEPSYS in coming years is what will give this company a huge boost. The technology is patented in US and Australia and pending in Europe. The benefits of NEPSYS is what will pull in customers. MBL, Richard Pratt have some faith in them, with sizeable parcels. Long term I think this will be an extremely large company.

 
of interest.........

http://bloomberg.com/apps/news?pid=20601081&sid=aX9IXC.aEoRI&refer=australia

Shell Says Cost Increases for LNG Projects May Ease (Update1)

By Angela Macdonald-Smith

Sept. 21 (Bloomberg) -- Royal Dutch Shell Plc, the world's biggest non-state producer of liquefied natural gas, said the jump in construction costs that is delaying new supply projects is set to ease as engineering companies expand.

For the first time in at least two years, engineering contractors are starting to seek new work in LNG project design, Linda Cook, executive director, Shell Gas & Power, said today in an interview from Melbourne. Advances in technology such as floating LNG plants will help overcome cost hurdles, she said.

Shell has a record six LNG production units under construction worldwide, in countries including Nigeria, Qatar and Russia, as it seeks to meet rising demand for cleaner fuel. In Australia, it has stakes in the producing North West Shelf venture, the $10 billion-plus Gorgon LNG project, the Sunrise and Browse fields, and this year found gas near Inpex Holdings Inc.'s Ichthys field.

``I do see contractors who are players in the LNG construction and engineering business around the world increasing their own capacity in order to better supply customers,'' Cook said by telephone. ``That makes me hopeful we'll see at least stabilization in costs going forward if not improvement. Also technology can play a role.''

The Hague-based Shell, Europe's biggest energy company, faced a doubling of the construction budget for the Sakhalin-2 LNG project in eastern Russia, to about $22 billion, while the Chevron Corp.-led Gorgon project off Australia's northwest coast is delayed as the partners work to address a jump in costs.

Global consumption of LNG will outpace the 1.6 percent annual gain in energy demand for the next 25 years, according to the Paris-based International Energy Agency. LNG demand is set to more than double by the middle of next decade, Purvin & Gertz Inc., a Houston-based energy consulting firm, said in June.

Gorgon Delays

Cook said she's ``hopeful about progress'' at Gorgon, in which Exxon Mobil Corp. has a stake. Shell earlier this month agreed to sell 1 million metric tons a year of LNG from the project to PetroChina Co. for 20 years, without giving a date for deliveries to start.

``All major projects similar to Gorgon around the world are facing cost pressures,'' Cook said. ``We have a strong partnership in Gorgon and we're working together well to address'' the cost increases, she said.

Cook declined to prioritize Shell's several potential LNG projects in Australia, which include an indirect interest in the Pluto venture through its 34 percent stake in Woodside Petroleum Ltd. Australia accounts for at least 10 percent of Shell's annual exploration budget of $2 billion to $2.5 billion, she said.

`More Important'

``Shell's been active in Australia for more than 100 years now and it's always been important to us, but I think now more than ever,'' Cook said. ``We see a number of opportunities for growth. I hope they all move forward and even more.''

It's too early to say how Shell may develop its discovery in a permit adjacent to Inpex's Ichthys field, Cook said.

``It's quite normal for companies in these positions to explore potential to cooperate in order to have the most efficient development possible,'' Cook said. Inpex, which has teamed with Total SA to develop Ichthys, yesterday said the partners will go ahead with the project without Shell.

LNG demand will continue to grow, driven by ``traditional'' markets such as Japan, South Korea and Europe, emerging markets such as India and China and potential new buyers such as Pakistan and Singapore, Cook said. China will be a ``major'' LNG buyer in the future, while the Indian market is ``developing quite nicely,'' she said.

Shell's short-term and spot LNG sales and trading are increasing, driven by customers' needs for flexible supplies to meet fluctuating demand, Cook said.

LNG is natural gas chilled to liquid form, reducing it to one-six-hundredth of its original volume, for transportation by tanker to destinations not connected by pipeline. On arrival it is turned back into gaseous form for delivery by pipeline to users such as power plants, factories and households.
 
and.........

http://www.rigzone.com/news/article.asp?a_id=50538

80 Oil Boosts Service Cos' Stocks, But No Milestone
by Brian Baskin Dow Jones Newswires Friday, September 21, 2007


HOUSTON Sep 21, 2007 (Dow Jones Newswires)
Although $40 oil ushered in an era of skyrocketing project costs in 2004 and $60 oil turned a rig shortage into a famine a year later, $80 oil isn't likely to have the same transformative effect.

Service company stocks tend to rise and fall with the price of oil, under the belief that they will see more business and more favorable contract terms when producers earn more. The Oil Service Sector index on the Philadelphia Stock Exchange crossed $300 for the first time ever Friday morning, after a string of records set over the last year.


But in the short term, producers, not the service companies, pocket the extra cash generated by rising oil prices. Only when that cash finds its way into exploration and production budgets do the drillers and technology companies benefit. That can take between six months and three years of high oil prices, said Roger Read, an analyst with Natixis Bleichroeder in Houston.
"In the very near term, it has no impact (on services companies); for producers it's immediate cash flow," he said.

Benchmark crude oil prices in New York hit $80 on Sept. 12 for the first time, extending a rally that's since brought the front-month contract as high as $84.10 a barrel, up some 20% in the past month alone. Prices have benefited from financial flows into oil markets in search of greater returns, as well as perceptions of strong demand in the fourth quarter and tighter supplies.

While it's unclear whether oil is set to stay above the $80 mark - the November contract on the New York Mercantile Exchange was trading down 98 cents Friday at $80.80 - the breach has prompted questions about what the fallout might be across the oil industry, not least for the oil services companies that have seen their profits soar in line with the oil boom that took hold in earnest in 2003.

With capacity still tight and demand rising, especially in the offshore drilling sector, $80 oil is less of a watershed than past price milestones - when the market is already perfectly aligned in the service companies' favor, things can't get much better.

"There doesn't seem to be any limitations on deepwater (drilling) at this point," Read said. "There doesn't seem to be anything capping service pricing power."

Rates Continue To Rise

When prices first started to rise this decade, oil companies suddenly found themselves able to justify heavy expenditure in frontiers such as deepwater and heavy oil. Service companies were caught by surprise and lacked the manpower or equipment to meet the windfall headed their way. Costs began to increase around the world and across the services sector. Even after three years of scaling up, labor shortages have kept rates rising through the present day.

"From an infrastructure standpoint, they're spending as much as they can...there isn't much ability to expand," said Poe Fratt, an analyst with AG Edwards in St. Louis.

As long as oil prices are rising, producers can grumble about escalating costs, but lack the leverage to push back. Costs have therefore become a much bigger factor in where energy companies choose to operate, with service companies following producers out of North America and offshore.

"One of the...benefits of having longer life assets and quality assets is it reduces your maintenance capital," said Charles Davidson, chief executive of Noble Energy Inc. (NBL) at a recent industry conference. Noble has moved away from older and smaller fields that require more upkeep to maintain production, as rising costs have eaten into margins there, he said.

In areas where energy companies are regaining control of project costs, including in the U.S. and Canada, $80 oil hasn't tilted power back to the services companies, however.

Recession Wildcard

Onshore work in North America is still one of the largest markets for the oilfield services companies, but the region is heavily tilted toward natural gas production. Gas prices rose with oil for several years, but flattened at the end of 2005, putting a cap on producers' budgets. Higher oil prices have almost no impact.

Early hints that North America was fading forced services companies, such as Halliburton Co. (HAL) and Baker Hughes Inc. (BHI) to shift their focus overseas. All are chasing companies like Noble Energy, which is hunting for oil off the coast of West Africa and China, as well as national oil companies undertaking big projects in their home countries.

Analysts say the entire international services sector - companies that perform various technological tasks rather than operate rigs - is a good buy. Oil prices over $80 only encourage more international exploration by publicly traded companies, and provide national oil companies with the cash to pursue their growth plans.

"We believe (Baker Hughes') investment in international infrastructure will start to yield better-than-expected results," Douglas Becker, an analyst at Banc of America Securities wrote in a note to clients.

On the other hand, months of $80 oil could send the global economy into recession, curbing demand for crude and ultimately hurting producers and services companies, Fratt said.

"As long as demand growth doesn't go negative...($80 oil) should have positive implications for the oil services industry," he said. "Production capacity continues to be well utilized, they will have to add additional capacity."
 
Hey Sophie Sweet and SOB

I happened to be in the Karratha Shopping centre the other day ( just on a sojourn from Broome) and noticed a group people wearing the Schlumberger overalls. When you are in Karratha you can see all sorts of companies and their workers wearing the company gear. It got me thinking, I wonder why Schlumberger are in this town given the presence of NMS and Mermaid Marine.

Do they have a piece of the market down here and if so will there be an impact on NMS? Or does Lange have something in the bag given his past association with Schlumberger?

Do Schlumberger have a presence on the NWS gas shelf? And if so what's the impact for Neppie?

Lange has worked for Schlumberger prior and are there synergies here or are we facing some stiff competition from Schlumberger?

I thought this observation might offer some insight, or perhaps not, into the debate.

Did either of you guys already know this?

Over to you

Sounda
 
Oh and is there some sort of takeover in the wind (or the waves)? My research is pointing towards NMS as being a very nice little takeover target in the offing - jeepers Lange knows what the Schlumberger deal is so what's the game?
This is not a ramp but someone tell me why the company Lange once worked for has suddenly appeared on the NWS gas shelf?
Coincidence maybe - but one needs to ask why?
 
sounda - i think youll find schlumbugga have been EVERYWHERE for years - their market cap is over $100B, and they dominate the landscape in comparison to most.

if you see some schlumbuggas wearing neppy caps, let me know.
 
Funny you should say that SOB I thought about giving them some Neppie caps and saying,
"Boys you'll be seeing a lot more of these around in the coming years"
 
"dont you ever let a chance go by oh lord, dont you ever let a chance go by"

next time seek their opinions - maybe take the crownies with ya
 
Our old mate Holdon is the crownie man - I'll checkwith him on the temp!!!
So what do you think wil be the next good news item?
 

Hi Sophie, thanks fo that

Would you know whose competitors NMS are? is MRM? Are these competitors also good investments? M & A even?

MRM - Earnings and Dividends Forecast (cents per share)
2007 2008 2009 2010
EPS 8.8 11.9 14.5 16.2
DPS 1.0 2.0 3.0 2.5

thx

MS
 
Hey SOB,
Those Rigzone & Bloomberg articles are good but, what we shouldn't loose sight of is, Neppy isn't just tied to the oil price for an income.
Keep in mind that, even if oil were to run out next week, (godforbid) ole Neppy is also well positioned for the decommissioning of undersea infrastructure.
Some good news from them would go down well about now....
 


MS - where did you get these figures?

(gee 100 characters is a bit much to fill sometimes when you want to ask a short but very relevant question)
 
Michael,

The information is on both websites.

http://www.neptunems.com/services.aspx

"The Neptune Marine Services group comprises of highly skilled and qualified engineering, technical support and commercial diving personnel. Neptune Marine has the capabilities to offer a complete range of integrated engineering services from seabed to surface including: project management, specialist engineering & fabrication services, asset integrity management, IRM (inspection, repair & maintenance), general diving services and of course our flagship patented dry underwater welding technology -NEPSYS."

Also they of course have the geotechnical surveying now, with TRISURV.

http://www.mermaidmarine.com.au/default.asp?cID=1

"With supply bases in Dampier and Broome and a range of modern offshore vessels, MMA is able to offer our clients marine logistics services throughout all phases of the offshore oil and gas development cycle.

The Company’s head office is in Fremantle and has its main operations base in Dampier which includes a private wharf facility and ship repair facility capable of servicing the range of vessels engaged in offshore support activities. Over the last 5 years MMA has invested over $100 million in a fleet renewal and infrastructure development programme to ensure we are able to meet the emerging requirements in Australia’s offshore oil and gas industry; particularly in the North West Shelf and Browse Basin regions where multiple billion dollar developments are currently being planned."



Those are cut and pastes from their websites. They don't seem to have conflicting services, except probably project management?? I could see them working alongside each other quite alot in the near future and possibly amalgamating. Pratt having shares in both probably can see that too.
 
if you have ever listened to the webcasts of apache, this is a very familiar story...."leaner cost structures"...how do they manage that i wonder.....

Smaller Oil Companies Fuel UK's North Sea Revival
by Benoit Faucon Dow Jones Newswires Tuesday, September 25, 2007


LONDON Sep 25, 2007 (From The Wall Street Journal via Dow Jones Newswires)
Tax changes and investment incentives are transforming the landscape of Britain's North Sea -- reinvigorating Europe's second-largest oil basin after Norway and raising hopes that its long decline may slow.

The revival has taken many in the industry by surprise, because when the government in 2005 announced it would raise taxes on oil production, big international companies warned the move would discourage investments.


Two years later, the biggest oil companies are reducing their presence, but a clutch of smaller companies have moved in to fill the void. The shift in ownership suggests the government may be able to capture more revenue from high oil prices while limiting risks to its energy security needs.
This year, Royal Dutch Shell PLC, Chevron Corp. and Exxon Mobil Corp. started to offload a sizable number of their North Sea fields, much as BP PLC and ConocoPhillips did last year. As they reduced their exposure, small, independent companies such as Fairfield Energy Ltd., Oilexco Inc., Venture Production PLC and Perenco SA seized what they saw as a good opportunity. These smaller companies have leaner cost structures that make them better suited to the mature, high-tax basin, energy analysts say.

The North Sea is to the United Kingdom what the Gulf of Mexico is to the U.S. -- a province that pipes oil and gas straight into one of the world's largest economies, reducing its dependence on tight international energy markets.

The future of the basin, which in 2006 produced 2.9 million barrels of oil equivalent a day, is crucial to global energy supply. But ever since a peak in 1999, production has been in decline -- falling 10% in 2006 -- as fields slowly deplete.

Large companies have warned higher taxes could accelerate that trend and are speeding up asset-divestments programs. In August, Chevron said it was selling its interests in the Mariner and Bressay fields to Norway's Norsk Hydro ASA for a sum not disclosed, pending regulatory approval. In June, Shell and Exxon Mobil unit Esso put a string of North Sea assets up for sale and entered exclusive negotiations to offload their Dunlin fields to Fairfield Energy of the U.K.

The major oil producers aren't abandoning the North Sea altogether. The assets Shell put up for sale in June represent just 8% of its North Sea production. But Shell has said it will reduce its U.K. North Sea investment in the coming years. Like other companies, it has moved to new areas such as Norway, Qatar, West Africa or Russia to find better value.

Oil companies raised a clamor last year when the British government raised tax on oil-production profits by 10 percentage points, bringing the tax rate to 50%. The Labor government also said it wouldn't rule out further tax increases if it wins the next elections, due no later than 2010. The tax increase worsened what is already "a very high cost environment," says Tom Botts, Shell's head of exploration and production for Europe.

Smaller companies, though, see the majors' pain as an opportunity. U.K. midsize company Venture Production, which bought a smaller peer for 224 million euros ($315.5 million) last year, has said it is looking into buying the Shell and Esso assets.

The U.K. fiscal system is "the best deal in the world," says Arthur Millholland, chief executive of Oilexco, a Canadian company that is moving aggressively into the North Sea.

He pointed out that the U.K. rewards companies investing in drilling wells with a 100% tax deduction on such investment compared with 25% to 30% in the U.S. This incentive, introduced in 2002, has been gradually expanded. The 100% tax deduction was deferred from 2005 to 2006, and new investment can be used to offset part of the tax for as many as six years.

Meanwhile, a measure put into place in 2002 -- the so-called Fallow Initiative -- is also helping. The measure forces companies to divest themselves of undeveloped acreage, and has been one of the factors pushing the major oil companies to monetize some of their licenses, the consultancy Hannon Westwood notes.

The newcomers are now playing a big role in investment. According to Hannon Westwood, recent entrants, none of which are major producers, accounted for more than 50% of all drilling in search of oil or natural gas in 2006, a proportion it expects will rise this year. The consultancy said drilling in 2005 and 2006 reached its highest level since 1998, with 116 wells.

Oilexco drilled about a quarter of the wells in all of the U.K. North Sea during 2006, more than BP, Shell, Total SA, Chevron and ConocoPhillips put together, according to figures from Wood Mackenzie, an energy-consulting company. Oilexco has expanded by acquiring stakes in North Sea fields that were left undeveloped by Chevron, Italy's Eni SpA or ConocoPhillips.

The smaller companies benefit from their leaner cost structure. In particular, says Oilexco's Mr. Millholland, they employ fewer staff. "We are as professional as big oil," he says. "What we do not have is corporate bureaucracy."

A spokeswoman for Oil and Gas U.K., a British oil-industry association, disagrees that smaller companies can take better advantage of U.K. tax rules than bigger ones. "A number of factors such as rising costs, fiscal uncertainty and lower production levels is having an impact on [U.K. North Sea] competitiveness and these will affect the business decisions taken by companies no matter their size," she says.

Hannon Westwood says the ownership change will have a positive impact on oil production as acreage where no exploration is taking place is being acquired by more active players. It points out that exploration drilling in 2005 and 2006 discovered an estimated 1.2 billion barrels of oil equivalent.

Mr. Millholland says he agrees with the U.K. government's view that the incentives will help slow the rate of decline of North Sea production.
 
Well if you're depressed and hungover after your team lost, here's a boost. A new set of skills to add to the quiker, and a base in Asia. Maybe they have enough services now?? Maybe just buy small dive companies with cash in the relevant markets and then push the add ons??


Media Release 01 October 2007
Neptune Marine to acquire specialist engineering firm SEA-STRUCT
•
Purchase price of A$17 million plus three-year earn-out
•
Generates annual revenue of A$9 million and EBIT of A$4 million
•
Immediately EPS accretive upon settlement
•
Extends Neptune’s range of products and services in the subsea oil & gas sector
•
Expands Neptune’s international presence into Asia
•
Management to stay with the business
Perth, Western Australia: Leading subsea engineering services company Neptune Marine Services (ASX: NMS) today announced the signing of a letter of intent for the proposed acquisition of SEA-STRUCT, a leading manufacturer and installer of specialised concrete based stabilisation and protection systems for the subsea oil & gas pipelines and cables and the broader marine services market.
Neptune will pay A$17 million plus a three year earn out based on future performance. Payment will be 70 per cent cash and 30 per cent in new Neptune Shares. The business’ financial performance is strong, currently generating A$9 million in annual revenues and A$4 million in EBIT. Upon completion of the acquisition, and after the issue of new shares, SEA-STRUCT will be immediately EPS accretive.
Established in 1993, SEA-STRUCT is a specialist engineering firm that manufactures, supplies and installs pipeline and cable stabilisation protection and erosion control products for the subsea oil & gas sector and the broader marine services market.
SEA-STRUCT provides offshore grouting equipment and personnel for freespan correction works as well as the SEAMAT range of precast concrete mattresses that are used to support, protect and stabilise subsea oil & gas pipelines. The SEAMAT range of concrete stabilization products are manufactured and supplied to most countries within SE Asia.
With a team of 37 staff within the 3 offices, SEA-STRUCT ’s Australian entity is based in Fremantle, Western Australia, and has affiliations with SEA-STRUCT International Pte Ltd in Singapore and PT SEA-STRUCT INDONESIA Batam Island, Indonesia. The business also has representatives in Europe, the United States and the Middle East. Customers include major energy producers, EPCM firms and government authorities.
Neptune’s Managing Director and CEO Christian Lange said SEA-STRUCT is complementary to Neptune’s existing operations and fits well with the group’s integrated engineering services and solutions strategy.
“SEA-STRUCT is an excellent business and represents another growth channel for Neptune. The business’ products are highly regarded in the subsea oil & gas sector and they are complementary with Neptune’s existing subsea pipeline engineering and maintenance services.
“Some of Neptune’s operating businesses have worked with SEA-STRUCT for many years, so we know the business and the team very well. We are delighted that SEA-STRUCT’s founder and Managing Director David Maclean will stay with the business for a minimum of three years and continue to drive its growth.
“SEA-STRUCT also gives Neptune the platform to expand its international operations in the immediate future. The business’ presence in Singapore and Indonesia means we can very quickly offer SEA-STRUCT’s customers complementary subsea engineering and maintenance services in these markets. This represents a good organic growth opportunity and a platform to establish Neptune in the broader Asian oil & gas market.
“Neptune is off to a strong start in FY2008. Our new businesses have come together well, and we are taking advantage of the integrated opportunities that have arisen as a result of our expanded business model. Across all divisions, we are winning new work and growing our operations. The SEA-STRUCT acquisition represents another outstanding addition to Neptune’s service and solutions capability, and will improve our geographical footprint. Neptune continues to assess additional growth opportunities in the global subsea oil & gas sector,” Mr Lange said.
Neptune expects to complete the acquisition of SEA-STRUCT in early Q3, FY 2008.
 
just plucking key points for discussion.......


manufactures, supplies & installs - so they bring to nms the workforce experienced in these facets, and all who can easily transfer their expertise to other nms businesses

fremantle, singapore & indonesia - locations where SOOOO much is happening now and well into the future...this aint a sort term boom.

you can assume the newly introduced management from the acquired businesses have recommended the add on of sea-struct - and can assume they will fit in perfectly to the culture developing at neppy.

looking to expand their services to sea-structs old clients, and as the following para says, this process is working very well with the bringing together of so many like minded companies.

if the acquisition cash component can be fully funded by cash flow rather than another placement or rights issue, and they make the market aware of that soon, we could have a very merry christmas.

langes dream continues to grow - where it ends who knows......one thing for sure - theres no end in sight.
 
$80 Oil Helps Some but Not All Service Companies
by Brian Baskin Dow Jones Newswires Monday, October 01, 2007


HOUSTON Oct. 1, 2007 (Dow Jones Newswires)
Higher oil prices have led to record highs for the oilfield services stock index, but it's not boom times for all companies in the sector.

In the past, higher prices for crude futures have lifted all the index's components, but this time around, some are seeing shallower gains or even falling stock prices.


Crude futures topped $80 a barrel on Sept. 18, and have for the most part stayed above that level since then, trading at $80.90 on Monday morning. The Oil Service Sector index (OSX) on the Philadelphia Stock Exchange, which aggregates 15 companies, crossed $300 for the first time in its 11-year history on Sept. 21. The two tend to rise and fall in tandem, as the price of oil eventually helps determine the amount of cash producers can use for exploration and production. In good times, services companies face increased competition for that extra business, with onshore and shallow-water drillers in particular seeing an onslaught of new rigs entering the market.
"It'll probably be anywhere from a six- to 36-month lag from a move in oil prices to an impact on services," said Roger Read, an analyst with Natixis Bleichroeder in Houston. "The (stock) market recognizes that in advance, so it makes sense stocks are moving to some extent on record oil prices."

The OSX isn't the monolith it once was, however. Shares of Cameron International Corp. (CAM), a global oilfield services provider, gained 20% over the last month, a slightly larger percentage increase than the price of oil. Similar companies, such as Halliburton Co. (HAL) and Schlumberger Ltd. (SLB), also saw healthy growth. At the other end of the index, Rowan Cos. (RDC), a shallow-water driller, saw shares fall 2% over the same period. Nabors Industries Ltd. (NBR), the lone land driller in the index, gained a relatively mild 5%.

Both Cameron and Rowan earn a healthy portion of their income in oil fields worldwide. But as their diverging fates show, $80 oil is not a cure-all for sore spots developing in some corners of the industry.

"You are having pushback from producers, you are seeing softness in drilling rig rates and in some of the service lines," said Read, who has set a $353 target price for the OSX in 2008.

Road To Riches

Back in 2004, $40 oil persuaded producers to greenlight far more projects than services companies could easily handle, which sent costs skyrocketing. A year later, $60 oil cemented an acute shortage of labor, rigs and other equipment. All of the companies, from Nabors drilling in Oklahoma to Transocean Inc. (RIG) miles off the coast of Brazil, benefited from rising oil prices.

The run-up to $80 from $60 this year hasn't lifted all stocks in the same way, with each component of the sector growing or suffering based on producers' actions and their own activities during the first three years of the boom.

Companies like Halliburton and Baker Hughes Inc. (BHI) help producers do everything from speed up the time it takes to drill a well, to extracting a bit more production out of aging reservoirs. Increasingly their work is outside North America, where national oil companies are using cash generated by high commodities prices to boost production and undertake huge exploration projects. For this reason, Halliburton opened a headquarters in Dubai earlier this year, and other larger services companies are expanding campuses abroad. All are hoping to boost international revenue enough to overcome a slowdown in the U.S. and Canada.

"We believe (Baker Hughes') investment in international infrastructure will start to yield better-than-expected results," Doug Becker, an analyst at Banc of America Securities, wrote in a note to clients.

Deepwater drillers are in a different race. Many of the most promising undeveloped fields are miles offshore, and for the last few years there haven't been enough rigs available to explore them all. Companies such as Transocean, Noble Corp. (NE) and Diamond Offshore Drilling Inc. (DO) have prospered. New rigs are starting to leave the shipyards, but most analysts give deepwater drillers another two or three years before supply catches up to demand.

"There doesn't seem to be any limitations on deepwater (drilling) at this point," Read said. "There doesn't seem to be anything capping service pricing power."

Left Behind

Drillers working in shallower water aren't having the same luck, and rising oil prices haven't changed that.

Like their peers further offshore, operators of rigs known as jackups saw business explode as oil passed $40 and $60. Unlike the drillships used to drill in 8,000 feet of water, jackups can be built relatively quickly and cheaply. More than 60 new shallow-water rigs will be available for work through the end of 2008, while nowhere near that number of jobs are expected to open up.

"Until customers move up their budgets significantly, the underlying assumptions" that the market is softening remain in place, said Poe Fratt, an analyst with A.G. Edwards in St. Louis. "They're bringing so much capacity into the market."

For $80 oil to have an impact on the jackup market, producers must first get used to the idea of higher oil prices, Fratt said. Most companies still pick projects based on oil prices around $40, or even the mid-$30s, he said.

Services companies with a large share of their business in North America face the same capacity problems as offshore drillers, but are hampered by a market tilted more toward natural gas than oil. Crude may have passed $80 a barrel, but gas futures plateaued around $7 a British thermal unit in 2006, and spent parts of the summer below $6. North American producers spend more on gas than oil, and announced cuts to their 2007 budgets at the start of the year, even as 300 new rigs were entering the market. Shares of Nabors, with the vast majority of its rigs operating in the U.S. and Canada, trade 20% below their level when gas prices peaked in December 2005, and have barely budged in the last month.

The OSX is more heavily tilted toward oil-focused companies like Transocean and Cameron, and has therefore been able to ignore the stable price of natural gas and shaky North American market.

"Energy is playing as market darling and OSX is the prettiest of the bunch," Dan Pickering of Tudor Pickering Energy wrote in a note to clients last week - while also cautioning the next day that shallow-water driller stocks are "dead money."

Copyright (c) 2007 Dow Jones & Company, Inc.
 
It's starting to look quite exciting again! Perhaps the speculation about subtle manipulation of the SP, for the purposes of issuing new shares for acquisition, is on the money?? All of a sudden it's running again, just as the acquisition is happening. The SP was $1.58 pre Lange, with alot less potential. It's a wonder this share hasn't exploded when you compare the situation before and now and the potential. The SP still seems more based on earnings, when it deserves to be alot higher based on potential. We now have 6 companies, that joined NMS, from within the industry that can see the benefit and vision that Lange has, as well as MBL etc.

And let's hope Son of Bag Limit is right about the payment possibly being paid straight from the coffers. I expect it will be. It's settled in early 08, they have a reasonable amount of time, new work and cash already in the bank. They would have to entice the owners of the acquisition with shares, but no need to dilute the SP more, after all, all the management have shares and like us, would prefer less dilution.

So they have bases in Asia, USA and of course Australia. How will they develop or acquire a Middle East or European office??? Maybe the Aberdeen office is already expanding??

It's all a far cry from jan06- Thank God!!!
 
I hope you're right SS, go Neppy you good thing.
Maybe I can recoup some of the win I didn't make by being too hasty April last year, in selling off 10,000 FMG at $8.00.
I still sneak a peak and, kick myself black and blue.
I thank my stars I bought Neppy at 53c and, certainly won't be making any hasty sales of Neppy shares in the next 2-3 years....maybe more.
 
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