Razor: Thanks for your comments. The advice is well taken, and I agree with your analysis that short-term commodity flux will drive down the price of many E&P companies (i.e., Triton - except that some of Triton's recent slide may also be due to the fact that every time they turn their back, a Colombian guerrilla blows a hole in the pipe). I also think that Seagull presents an interesting case study when attempting to hash out the commodity price vis-a-vis share price model). Anyway, back to Unocal: Pursuant to your last post, another point to bear in mind is that Unocal's share buy- back program provides some price support in the midst of declining crude prices (see Lehman Bros. recent buy recommendation comments). This fact is no better illustrated than by Unocal choking down a 50% decrease in earnings last quarter (primarily due to lower crude/n.g. prices) while the share price comparatively remained steady (more-or-less). And no, I am not advocating such thinly veiled artifical support, merely stating the facts. I did read on S.I. one investor who opined that he would be a buyer of UCL at $44 or better, and a seller below $36; I believe this to be credible technical trading advice. The above points withstanding, again, I am in agreement with your comments. Unocal is in need of a production ramp-up, and I think they have realized this in light of the company's recent announcement that Spirit 76 is planning a more aggressive exploration assualt in the G of M. However, if they do not bring additional production on-line in the next 12 to 18 months, no doubt the price will decline. Nevertheless, all of the above should not eclipse the reason I started this thread in the first place - that being the dramatic potential of this otherwise steady-growth large independent, thanks to the patent litigation. It is my belief that from a short-term standpoint (6 months), Unocal's gasoline patent dispute, coupled with some underlying support from the buyback program and the numerous buy recommendations out, provides this stock with at least a reasonable CHANCE at some strong appreciation, not the least of which has to do with the drillbit. It is not all that often you can look at a global independent and say that the firm has a feasible OPPORTUNITY to double in price in the short-term. I will take a 6 month position with limited downside and at least a 25% chance of huge upside any day of the week. It is rare that I play the larger names such as Unocal (prefering the small-cap E&P's for their appreciation potential). Unocal, however, is an exception in my book through Christmas of this year. As always, your comments are appreciated.
Wade |
