SUNDAY REVIEW / Korner's Review Of Canadian Markets & O&G Related (6)
Oil Service Stocks Start 1999 Off With A Bang
U.S. drilling and oilfield service stocks jumped off the starting
block in 1999, after falling sharply and being largely shunned by
investors during 1998.
Despite some gloomy corporate news on Thursday, oilfield service
stocks posted strong gains for the day, taking gains for the first
week of this year well into double digits.
The Philadelphia Stock Exchange's OSX Index of oilfield service
stocks rose 6.2 percent on Thursday to 61.03 points; the index has
surged 18.4 percent so far this year.
In contrast, the broadly-based S&P 500 Index, which closed slightly
lower on Thursday, is up just 3.3 percent so far this year.
Last year, the OSX Index fell nearly 55 percent, mirroring the slide
in world crude oil prices and missing out on the rally that drove the
S&P 500 Index almost 27 percent higher.
Analysts said the drilling and oilfield services sector had benefited
from the rise in New York Mercantile Exchange crude oil futures
prices to $13 a barrel this week from below $11 last month. The NYMEX
rally, which some analysts believe will be short-lived, followed an
enormous draw of almost 15 million barrels in U.S. crude inventories
last week and some sharply colder weather over the past five days in
the Northeast, the largest U.S. heating oil consuming region.
Purchases by investment managers who believe oilfield service stocks
offer good value in an otherwise expensive market also have helped to
support the rise in share prices.
''The market has got money to put to work and portfolio managers are
looking for names that are under-owned,'' said Schroder & Co. analyst
James Stone.
Stone said the coming months were unlikely to bring positive earnings
surprises from contract drillers and oilfield service providers, but
he believes their shares could end the year higher.
''I think it will be a volatile year for oilfield service stocks, but
I think the bias is going to be up,'' he said.
Stock of Houston-based Smith International Inc. (NYSE:SII) rose 12.6
percent on Thursday and 28.8 percent for the week, despite the
company's warning that its fourth-quarter earnings would fall short
of Wall Street estimates. On Thursday, Smith International shares
closed $3.63 higher at $32.44.
Smith International said it expected fourth-quarter revenues to be
some 13 percent lower than in the third quarter because low oil
prices had led to reduced exploration activity by oil companies.
Texaco Inc. (NYSE:TX) on Thursday struck a similarly somber tone,
announcing it would cut planned capital spending for 1999 by $600
million, or 11 percent, to $3.7 billion because of weak crude oil
prices. Texaco's stock fell 44 cents to $54.38 on Thursday.
A large portion of capital spending by oil companies is spent on
oilfield services. Many companies have already announced big cuts in
their budgets for this year.
But stocks of service providers and contract drillers shrugged off
such news to post strong gains.
Dallas-based Halliburton Co. -- one of the world's top two oilfield
service groups -- on Thursday closed $2.81 higher at $35.50, a gain
of 8.6 percent for the day and 19.8 percent for the week.
Noble Drilling Corp. (NYSE:NE) rose 75 cents, or 5.2 percent, to
$15.19 on Thursday, extending its gains for the week to 17.4 percent.
Diamond Offshore Drilling Inc. (NYSE:DO) on Thursday closed $1.56
higher, or up 6 percent, at $27.75 a share, making a year-to-date
gain of 17.2 percent.
The Philadelphia Stock Exchange's OSX Index of oilfield service
stocks fell 2.15% or 1.31 to 59.72 on Friday.
fast.quote.com
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Gulf Rig Count At 128 Hits Four-Year Low
NEW YORK, Jan 8 - There were 128 rigs under contract in the U.S. Gulf
as of January 8 down two from the previous week and at its lowest
level since May 1995, Offshore Data Services said Friday.
The utilization rate for rigs working in the Gulf, based on a total
fleet of 179, was 71.5 percent.
Two new rigs joined the U.S. Gulf fleet, with one to be working off
Venezuela and the other in deep water off Brazil.
The number of working rigs in the European/Mediterranean area fell
three to 97 rigs under contract. With a total fleet of 107, the
utilization rate was 90.7 percent, its lowest level since June 1995.
The worldwide rig count declined by seven this week to 508 out of a
total fleet of 615, a utilization rate of 82.6 percent, its lowest
level since mid-1995.
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Canadian Weekly Rig Count Up By 74 Over Previous Week
HOUSTON (AP) -- The number of oil and gas rigs operating nationwide
dropped by 21 to 600 this week, Baker Hughes Inc. reported
Wednesday.
Energy company officials said 990 rigs were operating in the United
States during the same week last year.
Of the rigs running this week, 466 were exploring for natural gas and
133 for oil. One was listed as miscellaneous.
Houston-based Baker Hughes has kept track of the count since 1940.
The tally peaked at 4,500 in December of 1981 during the oil boom. It
dropped to a record low of 596 in the summer of 1993, exceeding the
previous low of 663 in 1986.
The rig count represents the number of rigs actively exploring for
oil and natural gas.
Of the major oil- and gas-producing states, New Mexico and Texas
dropped by six each,
Oklahoma fell by three, Louisiana lost two and Alaska and Wyoming
lost one rig each.
Rotary Rig Count
1/8/1998
This Week Year
Location Week +/- Ago +/- Ago
Land 483 -17 500 -346 829
Inland Waters 17 - 2 19 - 5 22
Offshore 100 - 2 102 - 39 139
United States Total 600 -21 621 -390 990
Gulf Of Mexico 98 - 2 100 - 38 136
Canada 310 74 236 -199 509
North America 910 53 857 -589 1499
This Week Year
Breakout Information Week +/- Ago +/- Ago
Oil 133 - 4 137 -228 361
Gas 466 -17 483 -159 625
Miscellaneous 1 0 1 - 3 4
Directional 156 - 5 161 - 78 234
Horizontal 42 1 41 - 17 59
Vertical 402 -17 419 -295 697
This Week Year
Major State Variances Week +/- Ago +/- Ago
Alaska 10 1 9 - 1 11
California 19 - 1 20 - 12 31
Louisiana 145 - 2 147 - 74 219
New Mexico 27 - 6 33 - 28 55
Oklahoma 65 - 3 68 - 20 85
Texas 200 - 6 206 -161 361
Wyoming 28 - 1 29 - 17 45
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CAODC Weekly Western Canadian Rig Count - Jan 5th
WEEK OF JANUARY 5, 1999 VERSUS DECEMBER 22, 1998
DRILLING
MOVING DRILLING DOWN TOTAL YEAR AGO
ALBERTA 0/0 284/247 172/216 456/463 377
SASK. 0/0 15/ 15 44/ 48 59/ 63 62
B.C. 0/0 57/ 37 5/ 12 62/ 49 63
N.W.T. 0/0 7/ 5 0/ 1 7/ 6 0
MAN. 0/0 0/ 1 2/ 1 2/ 2 1
TOTAL 0/0 363/305 223/278 586/583 503
MOVING = CURRENTLY UNDER CONTRACT, BUT NOT AT FULL RATE.
TOTAL LINE IS TOTAL WESTERN CANADA.
FIGURES SUPPLIED BY CANADIAN ASSOCIATION OF OILWELL DRILLING
CONTRACTORS.
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