February 24, 2000
Oil-Services Stocks Produce Healthy Gains
By STEVEN VAMES
NYTimes.com/TheStreet.com, 6:49 p.m.
espite a down day for most of
Wall Street, oil-services stocks
continued Thursday to rack up healthy
gains as the outlook for the sector
continues to improve.
Analysts said the rising stock values in
oil services reflect the sustained strength
in crude prices that have allowed
cash-rich oil companies to boost their
drilling budgets.
"The fundamentals of the oil-services
group continue to improve," said Scott
Gill, co-head of research at Simmons &
Co. "Crude oil continues to hold around
$30 a barrel and natural gas prices are
strong because of very low reserves. This is setting up a situation where
exploration and production companies have a lot of capital to spend."
The prospect for a pickup in business, combined with a cyclical rotation
toward oil services as other industrial sectors languish, has given a lift to
oil-services stocks.
The gains have been wide-spread among all companies within the sector.
Notable movers Thursday included Global Marine closed up 1 5/8, or
8.7 percent, at 20 1/4, Marine Drilling Cos. closed up 1 9/16, or 8.3
percent, at 20 7/16, Ensco, closed up 2 3/16, or 8 percent, at 29 1/2,
and BJ Services closed up 3 13/16, or 8 percent, at 51 11/16.
Most of those companies' stock values had fallen steadily in the second
half of 1999 as weak oil and natural gas pricing caused earnings to fall
under the weight of a massive slowdown in exploration and production.
James Crandell, analyst at Lehman Brothers, said the sector could
continue to strengthen even if prices back off and the Organization of
Petroleum Exporting Countries decides to ramp up production.
Most analysts are expecting the oil cartel to boost production by some
degree, but that increase is unlikely to spur a supply imbalance similar to
the one which sent oil below $11 per barrel last year.
"The natural gas situation continues to look good in terms of maintaining
prices, and most people are starting to think that oil prices won't go back
below the $20-to-$25-per-barrel range," said Crandell.
The price of light crude for April delivery was at $29.97 per barrel late
Thursday, up 58 cents from its Wednesday close. |
