Mr. Rakers: The sector is what we term offshore construction/field development. These are the late cycle service companies: companies that are involved with the development of offshore fields ranging from the manufacture of sub-sea trees to the installation of offshore pipelines to the fabrication of offshore platforms. It represents the step right before bringing on first production of either oil or natural gas offshore.
TWST: How has 2001 been for these companies? Are the stocks performing in line with the rest of the oil service industry or are there particular nuances that need to be factored in?
Mr. Rakers: The oil service industry as a whole started recovering in the first quarter of 1999. A lot of these late cycle companies really did not start to benefit from the recovery until early to mid-2000. Despite the fact that natural gas prices have pulled back and arguably some sectors of the overall oil service sector have probably reached at least their short-term peak, some of these late cycle companies are really in the infancy of a recovery. But again, there is a lag effect between these companies and early stage companies that are associated with the drilling and exploration phases; this lag time can be as much as two, three, four years in some cases, particularly for the international deep-water field developments.
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