KOB.TO - East Lost Hills & GSJB joint venture Message Board

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Gold/Mining/Energy : KOB.TO - East Lost Hills & GSJB joint venture

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To: Salt'n'Peppa who wrote (11913)	9/18/2000 8:00:12 PM
From: Tommy D	Read Replies (1) of 15703

Sure would be nice to get some results on ELH sooner rather than later. The rise in oil/NG prices is quite scary to me as if it continues up, I am concerned that the market will begin to discount the projected price for oil or Natural Gas for 2001 on the basis of an economic slowdown or recession and that of course could significantly effect the price of O&G stocks. The latest copy of the Economist talks of how the market has for the most part discounted the inflationary effect or other consequences of the rise in oil prices yet history shows that when oil prices tripled (as they have here), a recession followed. I know it is unpopular to suggest but if I was running an oil and gas company, I personally would be hedging some portion of my firm's production at this time in veiw of the current commodity prices. With prices at $37, if a company hedges 25% of its production, it can still realize close to $25 average per barrel even if oil drops to $20. Arguably, current valuations are based on values that appear to be not much more than $25, so there would still be a reasonable basis for maintaining the stock price and maintaining cash flow to continue exploration activities. When people are attacking this view, just consider what the effect would be on prices if the world economy growth is zero or negative. A surplus on the oil markets would result in a very short period of time. Just my view and I make the above comments recognizing that the gas market in North America is different from the oil market so there may be different factors at work for the ELH play. However, if the other O&G companies catch a cold, it will effect the price of our stocks. In spite of all the above, I am very much long on BKP as I believe the exploration upside of their various projects or the takeover potential outweighs the risk of a shift in the perception of future commodity prices. However, I would like the commodity prices to stabilize or drop a little as that would benefit us greatly. TommyD

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