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Gold/Mining/Energy : Canadian Oil & Gas Companies

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To: Greg Spendjian who wrote (5769)	12/22/1998 8:56:00 PM
From: mark calgary	Read Replies (1) of 24899

I don't see much in the way of incentive for producer cutbacks. In the developing producing countries ( Mexico and Venezuela ) cutting back is just not in the cards fiscally. They need all the foreign currency that they can get their hands on in order to keep their own currencies afloat. The Saudis have taken the attitude that "We told you to cut back and you haven't - now watch it flow - we will blow you out and teach you a lesson. IMHO that is what is causing the glut of oil. What will it take for us to get through the oversupply? Asia will need to get restarted and while we are waiting the search for new supplies is tailing off drastically. Unfortunately we have found much better ways of finding oil and finding it at lower costs. Domestically ( Canada and the US ) we aren't cutting back on production at all. The smaller companies that were the growth enzyme after the last market tumble ( early 90's ) have now grown to intermediate size and are scrambling to cover costs and debt while the price is down so low. The more careless of these companies are dying on the vine and either have been or will be soon swallowed by those who saved some pennies for the rainy day ( take Blue Range and Remington for example ). What I find interesting is that some of the Income trusts have had their share prices attacked just as regular producers have, but that the $ yield has not changed all that much. The "dividend" percentages are very attractive right now because of this, and from a long term perspective these trusts look just terrific. It will be very interesting to see what kind of reserve right-downs are still to come from the oil companies. I think that there could be some staggering adjustments to reserves based on the accounting principle that says if its not worth getting out of the ground at todays price you can't book the reserve ( major impact on NAV ). Anyhow - just some thoughts Merry Christmas - glad to be of help

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