Drillers Report Operations Blues (BAS, RIG)

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Oil field services company Basic Energy Services, Inc. (NYSE:BAS) reported this morning that December 2008 operations were even lower than expected. Drilling rig utilization reached just 66% in December, down from 83% in November and down 88% from December 2007. The company had projected quarterly declines of 4-6% in revenues for the fourth quarter, but is now expecting a revenue shortfall of 11% for the quarter. Basic is lowering its rates and reducing capital spending, choosing to focus "controlling expenses and preserving liquidity."  Basic may have trouble finding customers, but Transocean, Inc. (NYSE:RIG) is firing its customers.

Transocean yesterday canceled a $550,000/day rig lease and stopped asecond drilling project after the client ran out of cash. In the secondcase, Oilexco Inc., a Canadian E&P company, has filed forbankruptcy protection. Transocean claims the $340,000/day contract forthe Oilexco project is still in force.

Basic’s share price is off more than 3% so far today, and Transocean isup more than 3% today, after dropping more than 8% yesterday.

Paul Ausick
January 13, 2008