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Gold/Mining/Energy : Strictly: Oil and Gas Exploration Companies
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To: Mark Adams who wrote (99)12/8/1998 8:51:00 AM
From: wolfdog2  Read Replies (2) of 318
 
Mark, the s*** has hit the fan in the oil patch. News could not be much gloomier. There have already been a slew of false bottoms in the sector. If you don't already, you might want to get a subscription to Offshore which is published by Mike Simmons. It's free.

Incidentally, E & P stocks are valued not against earnings, but rather cash flow. One of the reasons for this is because conservative companies write off all their drilling expenses up front, which has the effect of depressing earnings, even when the companies are doing well. You commented in an earlier post that EOG had a high P/E. I haven't looked at its P/E lately, but EOG's P/CF is about 6, which is low.

I also think that you need to differentiate between the fundamentals for the oil stocks and gas stocks. Perhaps you do, but that wasn't clear from your posts. I believe, conditions will stay depressed longer for companies focused primarily on oil than those focused on gas. Keep in mind that a US company drilling for gas in La, for example, has to deal with supply generated only by companies located in the US and some parts of Canada. Oil companies have to worry about supply created globally. At the moment the world is awash in cheap oil. Not so with gas. The gas surplus could evaporate very quickly.
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