Lagging oil-service industry may rebound early next year

For the past three weeks, investors have been drilling for profits in the oil-service stocks. The catalyst behind this rush into an industry that has not performed as well as the stock market was the government's giant lease sale in the Gulf of Mexico. At this sale last week the major oil companies plunked down a record $3.47 billion in bids for the leases.

Even though some traders cashed in their profits once the results of the sale were announced, analysts who cover the industry say they believe the sale should help companies specializing in offshore drilling pull out of the doldrums.

John Wellemeyer, analyst and managing director at Morgan Stanley & Co., notes the government intends to hold two more lease sales this year. He says by year-end there could be 1,000 new leases sold in the gulf. Currently, there are 1,700 leases outstanding.

At the same time, Mr. Wellemeyer says, the British government has proposed lowering the tax rate on some of the smaller oil fields in the North Sea. Since this will increase the return for the oil companies, it might also stimulate drilling in fields where there currently is no development planned.

And the Chinese are opening up offshore areas. Eventually, this will result in more demand for offshore drilling equipment.

Summing up, Mr. Wellemeyer says, ''I don't think we've ever had a time when so much was going on except when the North Sea was first discovered.'' However, he adds, ''We've also never had a time of so much surplus capacity in the offshore-rig fleet.''

In fact, John H. Hayward Jr., vice-president for Merrill Lynch & Co., say he expects this quarter will be the worst of the year as far as earnings comparisons go, except for the companies that are insulated by long-term contracts. By the fourth quarter of this year, he adds, ''I suspect that operating rates will bottom out.''

It would not be unusual for the stocks to anticipate this early. A. Jack Linder, an analyst with Dean Witter Reynolds Inc., says he drew a chart relating the stocks of major oil-field service companies and their relative price-to-earnings ratios to the Hughes rig count - the number of working oil rigs. ''We found that investors lead improvement in the rig count by a year,'' he comments. If this were to hold true in coming months, oil field companies would start to see some improvement in the first quarter of 1984.

If this is the low quarter, Mr. Hayward says, this might be the time to buy them, as in any cyclical industry. ''With drilling and day rates stabilizing in here and a pending gas shortage, or at least the end of the gas bubble, 1985 could be a good year.'' He rates the drilling companies as favorable purchases over the intermediate-to-long term.

Mr. Wellemeyer is also bullish on the group and particularly likes Murphy Oil , Odeco, Rowan Companies, SEDCO, and Tidewater Inc. In addition, he likes Halliburton and Schlumberger, both considered premier companies in the drilling business.

Where is Sherlock Holmes when we need him?

Watson, there's some sort of intrigue going on at the London Metals Exchange (LME). Over the past two to three months, someone - and we think it's the Russians - have been busy buying tons of silver.

What's that you say Watson? It's like the case of the disappearing silicon chips? Well, it is similiar to a case Holmes solved last year when someone was smuggling silicon chips out of the country.

So far, we only have a few leads, all pieced together from some rather unusual chaps.

What brought all this to our attention was the run-up in silver. One of the lads who keeps his eye on the gold and silver markets was reading a minor item in a brokerage house tout sheet when he noticed a comment from a J. P. Ingersoll Jr., an analyst at Salomon Brothers. Mr. Ingersoll speculated that the recent price rise in silver, which moved to $13.50 per troy ounce, is apparently attributable to the Soviet Union ''. . . using the metal for military purposes.'' Hmph! Exactly what kind of military purpose? we wondered.

What's that Watson? Did we talk to him? Well of course we tried, but you have to understand he's in the United States, and the connections were . . . well, you know.

But we did ask around in the City of London. One lad (you don't need to know his name do you?) suggested the Russians might be using the silver for missles, or possibly in batteries for nonnuclear submarines. Seems one rumor has it that it takes 25 tons of silver (800,000 troy ounces) to make such a battery.

Well, of course, we went right to Jane's Fighting Ships to see if the Russians are using silver to make batteries. Wouldn't you know it: Samuel Morison, the American editor, was there. ''There is no practical safe use of silver in such an enclosed area,'' he told us.

So we had to put in some real footwork; called up a lad we had talked to in another case, involving gold. A Frenchman by the name of Michel de Chabert-Ostland, the chief trader at the Sinclair Group companies. He says the Russians might be buying silver in order to boost the price of gold.

''They are very large sellers of gold,'' he told me. ''And it is to their advantage to see the price go up, so they can sell it at a higher price.'' However, since the gold markets are quite large, they might try to push the price of silver up, since this metal rises easier. Often the prices of gold and silver rise in tandem. Very curious and diabolical, Watson. A cabal!

But, before we went down to the LME and tried to arrest the rascals, we looked up a very respected dealer in bullion. He thought the idea of submarines and gold bullion ridiculous. Instead, he suggested ''photography.''

''Once I was talking to a Soviet precious-metals specialist,'' he stated. ''And he said the Soviets have strong consumer photographic interests, the same as we have.'' Silver is used in making photographic film. He also thought silver production in Poland, a source for the Soviets, might be down, forcing them to buy it on the world markets. He estimated the Russians have bought 10 million troy ounces of silver in the London markets.

So that's how we ended up here, Watson. We need to ask Holmes what the Russians are doing buying all that silver. Is he in?

Stocks bounced back last week, recovering from the previous week's profit taking. For the week, the Dow Jones industrial average closed at 1,216.14, up 26 .22 points. Volume surged over the 100 million-share mark twice in the week.