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Gold/Mining/Energy : PetroQuest Energy, Inc (PQUE and T.PQU)
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To: Toni Wheeler who wrote (440)8/25/1999 12:06:00 AM
From: Toni Wheeler  Read Replies (1) of 686
 
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Small cap oil and gas stocks heat up as commodity prices rise

By Bryn Harman

<<<The oil and gas rally of 1999 has been a welcomed stage of the industry's
cyclical existence. Stock prices of small cap oil and gas producers fell
dramatically in 1997 and 1998 as commodity prices cratered. The West Texas
Intermediate (WTI) crude price fell 65% in the 22-month period ended in
October of 1998. Many oil producers lost half of their market value as
revenue and earnings diminished in the low price environment.

Oil prices are a key determinant in the relative level of oil and gas
exploration activity. As falling prices reduce the value of oil in the
ground, exploration becomes less economic. Only 194 exploratory wells were
drilled in the U.S. in October 1998, representing a 56% decrease as
compared to the same month of 1997 (source: U.S. Department of Energy). As
a result, companies specializing in oil and gas drilling suffered through
the oil price lull to a similar degree as producers.

Thankfully, oil prices have demonstrated a pronounced recovery since the
fall of 1998 and the stock of small cap oil and gas issuers has responded
in an extremely positive fashion.

American drilling activity has not kept pace with the recent oil price
rally as only 857 exploratory oil and gas wells were drilled in the first
six months of 1999 (as compared to 1,504 wells drilled for the same period
in 1998; and 1,432 wells for the first six months of 1997).

While the oil and gas rebound appears to be well under way, drilling
activity has a long way to go before reaching post-contraction levels.
Higher commodity prices should drive drilling activity in the near term,
helping to continue the current small cap oil and gas boom in the U.S.>>>
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