Strictly: Drilling and oil-field services Message Board

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Gold/Mining/Energy : Strictly: Drilling and oil-field services

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To: waverider who wrote (22944)	5/27/1998 11:06:00 PM
From: Barry Cartwright	Read Replies (1) of 95453

Last trade on ESV was 47000 shares at 25.125 (uptick) Last large block on NE was 10300 shares at 29.875 (downtick) Some notes by a more bullish investment house: Natural Gas (may 26) Pricing: Our index of natural gas prices for '98 closed last week at $2.11 per thousand cubic feet (mcf), a decline of $0.04 per mcf from the week before. The near month (Jun) futures contract closed last week at $2.09, $0.08 lower than a week ago. Our index for '99 dropped $0.02 per mcf to $2.26 during the pre-holiday week. Recently weak oil prices, below $15 per barrel again last week, and relatively high levels of natural gas storage injections contributed to the pricing declines. Futures market values for oil are in the $17 per barrel range for early '99 and natural gas futures show $2.63 in Jan '99 as an expectation for next winter. The upward bias in natural gas prices in the futures market is consistent with our analysis that natural gas demand growth of about 2.5%-3.0% per year is greater than the 2% increase in supply available to the U.S. market. Storage: Industry statistics for the week ended May 15, '98 show additions to storage of 92 billion cubic feet (bcf). This compares to 62 bcf in a similar week a year ago. Overall inventories are about 42% greater than a year ago and 81% higher than at the same point in '97. Recent weeks have shown higher than expected storage additions for this time of year which we have attributed to expectations of a hot summer with greater electric generation demand. Beyond weather, the outlook for higher electric generation demand is also aided by limitations on coal supplies caused by railroad delivery issues. Valuation & Performance: Outperformance of the overall market in 2Q98 and year-to-date was enhanced last week for EPG, which rose by 3% (up 8% in 2Q98, 15% y-t-d). Despite a decline of 2% last week, ENE continues to outperform (up 8% 2Q98, up 21% y-t-d). CG rose 3% last week for an 8% appreciation in 2Q98 (up 7% y-t-d). The pipeline/diversified distribution group is about unchanged in 2Q98 and up 1% y-t-d compared to the S&P 500 which has risen by 1% in 2Q98 and 14.4% y-t-d. Oil (may 22) Continued weakness in the crude market is a buying opportunity for oil stocks-not a deterrent. We reiterate the fact that the major oils have outperformed the S&P in every year following every quarter that oil prices averaged less than $17 per barrel. Many market watchers seem to have missed the fact that although the crude market has made little headway, the major oil stocks are outpacing the S&P in the second quarter and one-third of the stocks (mainly in international group) are ahead of the index for the year. There is a more upside ahead. While we started the year with the assumption that the oil market would right itself during the year without outside intervention, it now appears likely that a group of oil exporters (including OPEC members) will again cut production to balance upply-demand. OPEC's ministers meet June 24 to consider production cuts; low oil prices provide a keen incentive to act.

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