Barron's Online interview -- PTEN, NBR, BJS, NOI
[Interview With Gerald Jordan ~ Big gestures come naturally to Jerry Jordan of Boston-based Hellman Jordan Management. From his days wearing the crimson of Harvard on the gridiron, to steering the Putnam Voyager and Vista funds to fame in the late 'Sixties and early 'Seventies....]
Q: So you are buying cyclicals now based on expectations for 2003?
A: That's when we are going to see the big numbers. This gets to the issue of valuation. If I told you that Patterson-UTI Energy, one of my favorites in the natural-gas area, sells at 20 and was going to earn $4 in 2003 with short rates less than 2% and long rates at 5%, you might get out your calculator and realize this appears to be inexpensive. Maybe it should sell at 14-15 times $4, which is what I expect.
Q: You're still a fan of natural-gas stocks?
A: In addition to Patterson, we own Nabors Industries and BJ Services and National Oilwell. All are major players in the onshore drilling industry. Natural gas is in huge supply around the world, there is plenty of it. The problem is we've consumed all of the easy reserves in North America. This last cycle we burned up a lot. Gas went to $10 an mcf. We are going to have another problem with gas, because we are going to have to drill deeper to get it. We'll eventually be able to import it, but not for five or six years or so or until gas stays at a high enough price to make it affordable for people who import. In the next upturn, these four companies will be winners. All of these companies' profits have peaked and they are going to go down now because as prices have come down, drilling has come down for the obvious reason. So we are waiting for the next uptick in prices to start the next cycle.
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