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: Gary Burton who wrote (44804)	5/15/1999 11:15:00 AM
From: Bernie Diamond	Read Replies (1) of 95453

WSW - analyst Paul Ting comments (SSB, formerly Oppenheimer) 12 month forecast constructive and bullish. We are at mid-point of historical prices of oil. May see spikes into 20's, but AVERAGE NEXT YEAR ~$18 (high teens). Oil stocks will outperform for rest of 99. Likes 2 groups: 1) Sensitivity to oil prices (Texaco, Arco, Conoco). 2)High return on capital employed, ability to increase efficiency and bring down costs, good financial strength (Mobil and Exxon - both are long term winners). Doesn't like refining area (Europe). OPEC regaining some strength in terms of proportional amount of oil and gaining pricing power. AMOUNT OF SPARE CAPACITY GOING DOWN (assuming statement referring to available world capacity). Cartels strength and weakness will come and go. Overriding motivating factor is their need to meet/break even their budget. Demand/supply still rules. Q - Responding to consolidations possible: Market is speculating on companies like Marathon and Phillips because of economy of scale. Mergers will continue in this sector, but he doesn't have strong feelings on who. Q - Responding to number of past mergers. Need to cut costs and low oil prices (stock prices) compared to UNDERLYING VALUE of companies purchased. Q - Responding on when to buy/sell. Cyclical sector. Looks at relative PE of oil companies. "Fair value" is ~20% discount to S&P 500. They are now selling at a steep discount to S&P. Sees a 15% increase from here. Short discussion on regulatory environment and expected increased costs that will probably be needed to meet those concerns in the future (Al Gore presidential run). Bernie

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