George, there two flaws in your most important point. First, if oil co.'s are waiting until OPEC increases production to increase capex, they may be waiting until it snows in Saudi Arabia. OPEC will delay significant production increases until they see non-OPEC capex increase. If there is no increase in non-OPEC capex, there is no reason to increase production. Secondly, if they increase production without increased non-OPEC capex, it will likely be in response to higher demand, tighter supplies, and a projected trend for the same. They will likely titrate the production upward, much like the 1/4 point interest rate moves we see the Fed perform. Any given change is too insignificant to move the market substantially; though taken as a whole, the series of moves get them to where they want to be to stifle non-OPEC market share, which is their *only* concern (apart from the integrity of their regimes.)
So if BP-Amoco is waiting for a big move in March, it will be a major let-down for them. OPEC and non-OPEC producers may, however, gradually dance around the issue with the non-OPEC countries increasing their exploration gradually and OPEC delivering a likewise graduated response in production. They are not fools over there.
The main caveat to these OPEC theories always has to be if some OPEC members conspire to move markets drastically in order to make money in volatile oil derivatives (oil futures, options on oil service companies, etc.) a la Saddam.
So where do you put your money? Why in PTEN of course! The domestic land drillers handle natural gas which is a growing market and immune (for the most part) from OPEC. They are also able to start up drilling quickly with little long term commitment and cost. They are also not inhibited by OPEC restrictions. Additionally, recent budget announcements reveal increase expenditures for domestic drilling (up >50% in 2000). The kicker is that PTEN has dropped ~35% over the past few weeks and is presently bouncing off its 200 DMA on HUGE volume. If ever there were a time to buy PTEN, today (or as long as it's in the 10's) is the day. Boom, Boom, Boom (that me pounding the table! <G>
Regards,
Richard |
