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

To: John Carpenter who wrote (47804)	7/12/1999 12:27:00 PM
From: Tomas	Respond to of 95453

Oil price recovery raises fortunes of industry weathering downturn - Houston Business Journal, July 12 Ann De Rouffignac Oil prices continue to hold at about $19 a barrel and have even skirted to $20 in recent weeks. And this good news to the energy sector is already having a positive impact on the stock prices of both exploration and production companies and the companies that service them. "Since February, a substantial number of exploration and production stocks have doubled. But they are still trading in the lower half of their trading range," says David Garcia, analyst with Everen Securities in Houston. "There is still some upside to the sector." Marshall Adkins, oil service analyst with Raymond James & Associates in Houston says he has seen a 45 percent improvement in the oil service index over the the past six months. Yet he says investors should brace themselves for some record-breaking losses from many oil service companies to be reported for the second quarter. "The market doesn't seem to care about the near-term earnings," he writes in his weekly report. "The move in the oil service stocks has more to do with the recovery in energy prices and the potential impact on earnings in 18 to 24 months than on any profits oil service companies could turn out in the next six months." While commodity prices are a far cry from their $12 a barrel level in February, the recent upturn to $19 a barrel won't last long, says Ken Miller, principal with Purvin & Gertz Inc. in Houston. "We have prices coming down a few dollars to the $17 range," says Miller. While oil prices have begun to fluctuate in the upper teens bringing relief to exploration and production companies, oil service companies are still suffering through hard times. The Baker Hughes rig count will probably bottom out at 488 working rigs in the middle of the second quarter. "While the CFO's of oil companies are breathing a sigh of relief from the recovery of oil prices, some are using the increased cash flow to reduce debt and others have modestly increased capital expenditures," says Garcia. Meanwhile, energy analysts at Dain Rauscher Wessels in Dallas are encouraged by the economic recovery in Asia and declining oil inventories. They are calling for West Texas Intermediate to average around $17.50 for the second and third quarters, creeping up to $18 in the fourth quarter. But Stephen Smith with Dain Rauscher warns that OPEC members could increase production as prices firm and that Iraq will increase its oil exports by 200 to 400 thousand barrels a day next year. Also the former Soviet Union's actual exports have been higher than estimates during 1999. Garcia says oil prices are definitely back to the $17 to $21 trading range going forward. "The possibilities that there will be a return to prices of $11 to $12 a barrel seems pretty remote," he says. amcity.com