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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 (57698)	12/31/1999 8:51:00 PM
From: jim_p	Read Replies (2) \| Respond to of 95453

George I've been in the oil patch now for 25 years, and if there is one thing most analyst don't seem to understand about the oil patch it is CAPEX. While it is nice to announce what your CAPEX is to the world, the truth is CAPEX is always adjusted up or down throughout the year depending on the economic environment and the availability of capital. Oil company's always have and always will spend 100% of their excess cash flow. The main variables outside of CAPEX are the levels of debt companies are comfortable with, which is a function of both their confidence level in the future price of oil and gas and the availability of capital. Based on the 12 month strip on NG prices, you have to conclude there is a high level of confidence in the future price of gas. Despite the set backs we have had with record warm weather, the fundamentals for natural gas have never been better in the last 10 years. Oil is less certain, but based upon the current level of consumption and the dramatic and unexpected recovery in Asia, the excess supply of oil will be gone by 2001. That is not very far away. At that point oil prices will be based more upon the incremental cost of replacing the last barrel of oil you just sold, not the low finding costs of crude in the middle east or an artificial price set by a cartel. In the patch there is either too much capital or none available at all. The extremes of the availability of capital are one of the main drivers which cause the dramatic up and down cycles in the patch. The average up cycle last about three years and the average down cycle lasts about two years with the obvious exceptions. I believe gas will carry this cycle until the price of oil is more predictable. This should be one of the longest up cycles in my lifetime. A good time to be long the oil patch. Rotation from the internuts is only an added bonus. Happy hunting to all. Jim