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Strategies & Market Trends : Technical analysis for shorts & longs
SPY 694.04-0.2%Jan 29 4:00 PM EST
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To: Johnny Canuck who wrote (32983)6/21/2001 3:38:47 PM
From: The Ox  Read Replies (1) of 70258
 
Message 15514560
Message 15671923

Oil Service sector often changes directions sharply based on the underlying commodity prices of NG and Oil. Oil prices have come down from 29-30 to 26-27 over past few weeks and NG prices have slipped significantly from the high 4s to the mid/upper 3s. These drops have led the sector downward. NG in storage has been building up significantly over the past 10 weeks. Just 10 weeks ago, there was a great concern that there wouldn't be enough NG in storage for the summer but these fears have receeded quickly. The number of rigs drilling for NG+Oil have increased dramatically over the past year, which is why companies like KEG have seen their stock prices rise.

Fundamentals for KEG support a higher price, IMO but the current commodity price environment has caused the weakness. Company is expected to report 21 cent earnings in July after reporting 17 cents last Q. The number of rigs working has been increasing as old(stacked) rigs are being refurbished and put into use. Cash flow has been excellent over the past few quarters, so if their cash levels are low, it's because they are putting what they have to work while the business is booming - refurbishing rigs and other support vehicles. They are also retiring debt with their cashflow.
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