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

To: Crimson Ghost who wrote (56626)	12/10/1999 8:06:00 AM
From: Crimson Ghost	Read Replies (3) \| Respond to of 95453

Another view on oil prices: Seems far fetched, but we are living in crazy times Y2K, Oil & Bill Richardson (GOLDFINGER) Dec 09, 17:16 Forum, Bill Richardson should be concerned about rising crude prices, but in reality there will be very little the U.S. can do to influence oil prices. The past 30 years have demonstrated this time and time again. Here are some points to consider: Bear in mind I have been working as a Senior Petroleum Engineering Consultant in South America for the past 3 year (mostly in Venezuela and Colombia.....currently with one of the largest multi-nationals in the world), and previous to that I worked in the Persian Gulf. 1. First of all, I am very much inclined to agree with Harry Schultz's article from yesterday regarding his prediction that crude oil could doubled in price very soon (he is predicting possibly $50/bbl by Dec. 31st and $75 to $100 early in 2000). I think the following scenario will un-fold:. a. Y2K creates oil shock. b. stock market collapses due to oil shock....similiar to 1973/74 scenario. c. precious metal prices go ballastic in reaction to collapsing stock markets. 2. Venezuela is by far the single largest supplier of crude oil imports to the U.S. Having worked there recently I observed the following; a. majority of the wells require artificial lift. There are literally 10s of thousands of wells producing via gas lift and electric submersible pumps. Power outages are frequent at the best of times in Venezuela. b. the words "equipment maintainence" are virtually non-existent in Venezuela. c. Venezuela was 100% non Y2K compliant in March of this year, now they claim to be 100% Y2K compliant. I don't believe them for one moment! To my knowledge, they have done nothing in regards to Y2K testing. d. Venezuela is severely cash-strapped. The government can barely pay it's workers.....so how can they check for Y2K compliance. e. Because of artificial lift requirements (i.e. electrical power requirements) and lower well production rates I think the logistical infastructure is much more complicated, thus more vunerable, to Y2K than in many other producing nations around the globe. 3. The basket price for Venezuelan Crude (heavy oil) is considerally cheaper than West Texas Intermediate, Brent or Saudi light crudes. The U.S. has a cheap sources of crude, which they up-grade in U.S. domestic refineries for commercial purposes. I believe the real motive of Richardson to "drive down" energy prices is to conceal that inflation is here, and Y2K problems and a cold winter will exasperate the problem. 4. The Oil Company I am currently working with are anticipating problems (in their oversea operation in particular). To the best of my knowledge, they have conducted little if any Y2K testing. I am under the impression they shall fix the problems as they come up. So let me ask you all this: If a major multi-national company has spent minimal money on Y2K testing, what would you think cash strapped National Oil Companies have spent..........nothing! 5. On November 30th, 1999, the International Energy Agency (as reported by Reuters) has drawn up plans for global rationing of oil production. 6. The Middle Eastern producing countries export very little crude to the U.S. They could care less what the U.S. thinks, unless of course a problem were to spring up that would shut-off their taps (which would take another war). Some how I doubt that shall happen in the next 3 months. Sorry Mr. Richardson, but unlike your buddies being able to manipulate the POG down they will not be able to do the same with the price of crude. Middle Eastern countries are wise enough not to trust the West. Historically, OPEC has only intervened in collapsing oil prices, not rising prices. Unlike the past when Middle Eastern producers were awash in petro-dollars, they now have debts to pay........Gulf War for example. It is my understanding OPEC will not meet again until March 2000. I believe OPEC has stalled and will continue to stall their meetings due to Y2K concerns. OPEC is very much a re-active as opposed to pro-active organization. A collapsing stock market, thus a collapsing dollar would be in their interest so as to monitize U.S. dollar debts (similiar to what the U.S. did to Japan in the early '80s). As the dollar collapses relative to the Euro, producers can agree to be paid in Euros. Saudi's Maaden purchasing the other half of Boliden Gold Mining Company (just before Y2K) is a tip-off (in my opinion) this game is coming to a conclusion.

To: Crimson Ghost who wrote (56626)	12/10/1999 9:19:00 AM
From: Richard D	Read Replies (1) \| Respond to of 95453

George, there two flaws in your most important point. First, if oil co.'s are waiting until OPEC increases production to increase capex, they may be waiting until it snows in Saudi Arabia. OPEC will delay significant production increases until they see non-OPEC capex increase. If there is no increase in non-OPEC capex, there is no reason to increase production. Secondly, if they increase production without increased non-OPEC capex, it will likely be in response to higher demand, tighter supplies, and a projected trend for the same. They will likely titrate the production upward, much like the 1/4 point interest rate moves we see the Fed perform. Any given change is too insignificant to move the market substantially; though taken as a whole, the series of moves get them to where they want to be to stifle non-OPEC market share, which is their only concern (apart from the integrity of their regimes.) So if BP-Amoco is waiting for a big move in March, it will be a major let-down for them. OPEC and non-OPEC producers may, however, gradually dance around the issue with the non-OPEC countries increasing their exploration gradually and OPEC delivering a likewise graduated response in production. They are not fools over there. The main caveat to these OPEC theories always has to be if some OPEC members conspire to move markets drastically in order to make money in volatile oil derivatives (oil futures, options on oil service companies, etc.) a la Saddam. So where do you put your money? Why in PTEN of course! The domestic land drillers handle natural gas which is a growing market and immune (for the most part) from OPEC. They are also able to start up drilling quickly with little long term commitment and cost. They are also not inhibited by OPEC restrictions. Additionally, recent budget announcements reveal increase expenditures for domestic drilling (up >50% in 2000). The kicker is that PTEN has dropped ~35% over the past few weeks and is presently bouncing off its 200 DMA on HUGE volume. If ever there were a time to buy PTEN, today (or as long as it's in the 10's) is the day. Boom, Boom, Boom (that me pounding the table! <G> Regards, Richard