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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Thean who wrote (16303)3/24/1998 12:43:00 PM
From: Czechsinthemail  Read Replies (3) of 95453
 
Thean,
It looks to me like we may be witnessing a lot of head-fakes today in the oil market and among the drilling and oil services stocks. Reports maintaining that the producer agreements won't hold have to be expected given the sharp run-up in crude prices, but are not necessarily reliable. They can serve as ways of jawboning prices down, and often are issued by or for the benefit of those those holding short positions or wanting to get into long positions at lower prices. I think there is a fairly good likelihood that the combination of early production cutting by OPEC members and upcoming API statistics that may continue the recent trend of reducing stockpiles may give oil prices a further boost. In any case, it is worth looking at the situation from the perspective that yesterday's boost of close to $2 per barrel in crude prices was one of the biggest one day jumps. For the purposes of evaluating drilling companies, it increases the visible profitability of drilling projects and perhaps more importantly supports investor sentiment around buying into drilling and oil services companies.
I continue to favor the shallower offshore drillers as the best combination of benefitting from the rising oil price environment while entailing less risk than the land drillers. The best sleep at night positions will continue to be the ultradeep drillers. I bought more ESV today. I think its relative price underperformance recently plus its projected earnings outperformance make it particularly attractive.
good luck,
Baird
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