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: Teddy who wrote (30682)	10/16/1998 2:56:00 AM
From: Paul Angell	Read Replies (1) of 95453

Teddy, I wrote this response on Tuesday, but was unable to send and I was out of town Wed and earlier today. You wrote: "There's no reason to buy another drilling stock until the end of the year" is probably not far off the mark, but you risk getting caught in the headlights when the momentum comes back. I have sold big names before every major dip in the last 3years and have had some 90% in cash to get back in and I know that in the majority of cases I should have simply held on because I had never had the balls to get back in at the right price. Not to mention the annual donation to the IRS for capital gains. Who knows exactly when recovery will start, but I know that the Joe Public wont touch OS until after it hits new highs. There is a lot more upside to crude price than most analysts can see. These are my personal opinions and from reading various research notes: 1: The beginnings of recovery in Asia. The current accounts for the majority of Asian nations went into positive last Q. They need export led recovery but there is a squeeze on credit (because of battered currency) so they cannot produce as much and export as quickly as they need to. This will hopefully change if Japan gets out of the sick bay, she will be the "bell cow" and strengthen the surrounding economies. 2: While crude stocks have mounted up, the holding volumes are down in absolute terms over the past few years. Refineries don't hold excess supplies in any great quantities. It does not pay to store it. This limitation on stock piles has led to previous upturns in price. A cold snap in US and Europe will cause a spike. 3. N. Sea new fields predicted to come on stream this year and early next year have suffered numerous setbacks, and serious cost overruns. This couple with winter storms could limit some supplies. 4. OPEC seems to be getting compliance and their declared goal is brent at 17 - 20/ bbl. 5. The potential for consolidation in land and shallow water drilling should create significant value. 6. Worldwide use of natural gas is on a long upward trend. Analysts are predicting that the price will de-couple soon from crude prices. This will create another upturns for land rigs. In North America there is going to be a shortage of gas over the next few years if there is no more drilling. 7. The majority of 1 billion barrel fields discovered this since 1930 are still producing. As mature fields they will not survive without well service work. Ref: Doug Vant's numerous posts on work necessary to maintain 70+ MMBPD. I say 70+ because my basic graphs tell me this is where it was in 1996 when Brent was $20 - $25. 8. This sector is in a long upward trend and this will hopefully turn out to be a temporary setback. That all said, I cannot blame you for playing the waiting game until next year if that is your choice. Paul.

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