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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: diana g who wrote (47538)	7/8/1999 9:33:00 AM
From: SargeK	Read Replies (2) \| Respond to of 95453

Pros and Cons The following is a first page recap in the Tyler Morning Telegraph: By Stephen W. Spivey "Joe May says $20. a barrel is not good enough anymore for most East Texas oil producers - especially the independents. The rising costs of saltwater injection take much of the profit out of operating marginal wells, said May, who owns his own oil company based in Overton. May does not project an increase in exploration activity just because cash prices are on the rise. "Operators are putting stripper wells back into production, but don't look for a lot of new oil drilling anytime soon, he said. "The (price) has got to go higher than it is" May said. "Most people are not really drilling for oil. They're drilling for gas." The bigger players, however, are more optimistic. Fort Worth based Cross Timbers Oil Co. said the improving fortunes for will definitely impact their drilling plans for East Texas. ""The rebound in oil prices has enabled Cross Timbers to revise its 1999 budget for Capex from $60 to $70 million range to the $70 to $90 million range,"" said Preston Kirk, Cross Timbers spokesman. ""Our exploration budget last year was $78 million and a portion of the capital budget expansion will be expended in the East Texas basin."" James Smith, who runs an evaluation engineering firm in Tyler said: "It is a heck of a lot better than it was." Further, "The economic forecast that we make for $19 oil is steady. I think it will stimulate some (drilling) activity. 'The forecasters are saying it will'. Out of the 11 permits in application his firm is working on, four are for oil wells, he said. Smith said his financiers are making budget projections based on oil prices of $19, with prices rising at three percent a year. "That is the read that I'm getting. I think that is a cautious read," he said. For the first time nearly 20 months crude oil prices are back in the $20 a barrel range. The last time cash prices closed above $20 a barrel was Nov. 18, 1997 when WTI fetched $20.04. PRODUCTION DECLINES: Analysts credit OPEC for sticking to promised production quotas, but expressed doubts about the viability of maintaining the $20 price. Jerry Higgins, an analyst in the Texas Comptroller's Office, said $20 oil is 'not something to be trusted' until struggling Asian economies are further along in recovery. 'There is reason to believe that $18 to $19 could prevail, but world demand is not growing as fast as it will need to sustain $20 a barrel,' Higgins said. 'In general, OPEC's cuts have been holding in place. The speculation was that it might get one-half to two-thirds of that, but it looks like the whole two million barrels has been taken out of the market." OPEC member nations agreed in Mach to cut their combined production from 27.5 million barrels a day to about 25 million. With prices higher than they have been in almost two years, there could be a temptation on the part of major producing nations to let oil 'start slipping out the side door', he said. David Garcia, an analyst with Everen Securities in Houston, sees it differently. "After a six-month excursion with oil in the $11 to $13 ranger, I think the various entities, have learned how much problems can be caused by cheating and I would be surprised if it (price) returns to that range in the immediate future," Garcia said. "A lot of times you'll get 60 percent compliance (from OPEC), but the latest number I've seen show north of 85 percent compliance. LAYOFFS CONTINUE: Meanwhile, the biggest oil service companies continue to lay off workers. Last week, three of the nation's largest such companies - Cooper Cameron, Baker Hughes and Smith International - announced additional jobs could be lost on top of previously announced cuts if business does not improve."" SargeK Note: With the overnight crude price increase, media is again focused on the sector. I expect OSX prices to increase across the board today and tomorrow........ Good luck!