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Couldn't agree more. Market is pricing in a full stop on drilling. Highly unlikely although we are seeing some signs of weakness. Most of the exploration companies have put in a hiring freeze while they wait to see what the market does (recession?).

NGL's should start to fall in price as the market is saturated. NGL's (natgas liquids such as propane) are not a replacement for oil and they have their own markets. You don't put butane in your gas tank. Demand is strong from chemical companies that can use NGL's to produce polypropolene and a few other materials along with fertilizers. At some point they will get more than they can use and as we see signs of a global recession then demand will fall. Drilling could keep going to capture acreage in many of these plays just like we witnessed with natgas but budgets are going to get hit if prices fall. Most of the NGL drilling is in the Utica and Marcellus shale along with some in the Anadarko basin.

The other driver for shale drilling is oil and gas condensate which is different from NGL's. Condensate is like diesel or gasoline depending on how light it is and it mixes with oil. It's worth a lot more than NGL's since it requires very little refining and is sold as oil. It's also a lot easier to separate out of the gas stream. Drilling for oil and gas condensate should remain very strong unless oil prices fall to the $60-70 range where most of the shale plays will be non-commercial. Operators will still keep drilling in these plays to capture acreage but they'll be limited by their cashflow. Most of the oily shale plays run down the front range of the Rockies from Canada to the Rio Grande.

The current environment is still very strong but we aren't seeing any price increases. If we slide into a recession PDS will do just fine as they have premium rigs that will continue to find work in a soft market. The retirement of older less capable rigs will accelerate which is something that PDS has been preparing for and PDS has the ability to stop building new rigs that they don't have committments for yet. The oil shales plays are in the early phases and capturing acreage is very important right now. Drilling will continue and operators will upgrade to the premium rigs to drive efficiency while prices remain soft. PDS is in a good position and the stock price reflects a full blown recession on the horizon. I think investors will be surprised how well they do even in a bad economic environment.

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