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

To: Tomas who wrote (51294)	9/18/1999 9:32:00 AM
From: Tomas	Read Replies (1) \| Respond to of 95453

Energy service stocks still sizzling. Drilling boom - Financial Post, Sept.18 By Ian McKinnon CALGARY - Energy service firm stocks have glowed red hot in the past six months and analysts see no reason for the sector to turn cold, despite weak financial results released this week by a couple of companies, including bellwether Precision Drilling Corp. The biggest drilling outfit in Canada, Precision lost $2.4-million (5½ a share) in the three months ended July 31, compared with earnings of $22.2-million (53½) in the same period a year ago. The loss was largely shrugged off by the market as the stock (PD/TSE) remained near its 52-week high of $40.60. Brian Trenholm, who follows the sector for Griffiths McBurney & Partners, said service stocks are flourishing because high oil and natural gas prices, increased pipeline access to the United States and declining reserves are combining to create a drilling boom similar to 1997, when 17,000 wells were punched down. While a breakdown in the latest round of production cutbacks by oil-producing countries could pull the plug on the boom in oil prices, analysts figure it has a few years left to run. "Within the next two years we could see a return to conditions similar to 1997, which was a record year," Mr. Trenholm said. "I think these commodity prices will be sufficient to generate enough cash flow and, when combined with external financing, will support the drilling of between 16,000 to 18,000 wells, although we may not see that level of activity until 2001." Miles Lich, service analyst in Calgary with Peters & Co., said service stocks have risen about 130% in their current run, compared with a gain of 679% in the bull market of 1995-97. "Given the price environment we're in right now, things are looking very positive. I'm still very bullish on the service stocks." So far this year, stocks in the oil services subgroup of the Toronto Stock Exchange 300 have delivered returns of nearly 80%, nearly double that of the broader oil sector and eight times the return of the TSE 300 itself. Among Mr. Trenholm's endorsements are favourites Bonus Resource Services Corp., NQL Drilling Tools Inc. and Tetonka Drilling Inc. "I think it's still early enough that you don't have to differentiate a lot between the companies. The bulk of these stocks are still going higher because we are still early in the cycle." While stock prices have shot up far quicker than drilling activity, the future for service players looks good even if oil prices decline next year from the current level of $24 (US) a barrel, said Sebastian Orsi, an analyst in Calgary with Dundee Securities Corp. "I see upside in this sector at $20 (US) oil, which is our forecast, but anything above that will certainly be appreciated." Increased capital spending for this year or next by petroleum producers has helped drive service equities sharply higher. At a conference this week in New York, Renaissance Energy Ltd. outlined plans to boost spending to $600-million next year from $525-million in 1999; Crestar Energy Inc. said it will spend $400-million in 2000 compared with $250-million this year; and Canadian Hunter Exploration Ltd. is predicting a sum of $300-million versus $240-million. In a recent research report, Mr. Lich named Ensign Resource Services Inc. and Request Seismic Surveys Ltd. as his top picks and rated 13 other service firms as "buys." nationalpost.com