Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Warpfactor who wrote (58382)	1/13/2000 7:17:00 AM
From: Tomas	Read Replies (1) \| Respond to of 95453

Cheap oil, gas stocks spell boycott: analysts Firms urged to improve return on investment, or prices will continue to languish The Globe & Mail, Thursday January 13 STEVEN CHASE, Alberta Bureau Calgary -- The cheap prices assigned to Canadian oil and gas stocks amount to a boycott of the sector by capital markets, which are waiting for energy firms to improve return on investment for shareholders, analysts say. "Basically, [equity] capital went on strike," says Greg Pardy, who follows Canadian oil and gas producers for Goldman Sachs & Co. in New York. Analysts caution the days of easy access to share capital are over for many in the Canadian oil patch, and they predict companies will be forced to sweeten rates of return to woo back investors, who now have far more options for where to put their money. These warnings come as many oil and gas producers in Canada are scratching their heads at what they consider undervalued energy stock prices, despite strong crude and natural gas prices. "Despite favourable fundamentals, Canadian [exploration and production company] valuations have traded down to levels that give a new meaning to the word inexpensive," Mr. Pardy and colleagues say in a recent paper on the sector. The Toronto Stock Exchange's oil and gas subindex has sagged more than 16 per cent since hitting a 52-week high late last summer, despite what analysts call the best combination of oil and gas prices in recent memory. Share prices of energy companies are trading at discounts of several times cash flow. Some of the reasons for these discounts are habitual commodity worries. Investors are nervous that crude prices will fall if the price-setting Organization of Petroleum Exporting Countries jacks up production this spring. Plus, the 1999-2000 winter is shaping up to be the third warmer-than-average winter in a row, a move that has caused natural gas prices to pull back significantly from 15-year highs. The "capital strike" isn't as bad for the huge Canadian oil and gas producers, who have an easier time raising money. They could see their shares jump if healthy oil and gas prices survive in 2000. But analysts warn that investor restlessness is a permanent problem that has raised the bar for oil companies looking for equity. Technology stocks have taken the lead among speculative investments, and investors are putting in far more money abroad in the wake of new registered retirement savings plan-eligible funds that get around the 20-per-cent foreign content limit on RRSP portfolios. This tidal shift is the undoing of the oil and gas sector, which saw junior and intermediate companies flourish in the late 1980s and early 1990s on the strength of easy access to capital and a steady sale of assets by retreating majors. The share capital came from the growing mutual fund industry, which provided increasing amounts of it, says analyst David Stenason of Scotia Capital Inc. in Montreal. "My opinion is the industry has poorly understood the true cost of equity capital. . . . You don't receive this for free: You must generate a return for it or the equity gets taken away." Unfortunately, the track record of the oil patch has proven dismal for the past half-decade, analyst statistics show. On average, exploration and production companies have generated a rate of return of around 5 to 6 per cent. For years, profitability has taken a back seat to growth as companies scramble to boost production in an increasingly tapped-out geological basin, where the easy pickings are disappearing, analysts say. The low, single-digit returns pale in comparison to other sectors, such as the banks, which earn in the 15-per-cent range, and technology companies, which reward investors with 17 to 25 per cent, Mr. Pardy says. "If an oil company can't generate a [10-per-cent-plus] rate of return, then why should anybody invest in them?" he says. For companies, this means reining in capital spending, so instead of forking out several times cash flow in a good year to grow quickly, they take a more prudent approach. For some it will mean buying back shares, as Anderson Exploration Ltd. and Crestar Energy Inc. have done, to boost the value of their stock. Companies that analysts say manage to effectively juggle growth and profitability include Penn West Petroleum Ltd., and Rio Alto Exploration Ltd. Others that make the grade include Talisman Energy Inc., and Anderson and Canadian Hunter Exploration Ltd.

To: Warpfactor who wrote (58382)	1/13/2000 10:02:00 AM
From: SargeK	Read Replies (2) \| Respond to of 95453

Response to Yahoo Poster re: FGH I attempted to respond to a poster using alias dadsal2 on Yahoo; but, could not because of technical difficulties. I beg this message board's indulgence to POST my response to his message: messages.yahoo.com dadsal2 Spreading rumors is unlikely to get your money back. Remarks such as these may help vent your anger and frustration; but, it reflects poorly on yourself to fabricate speculations WITHOUT any basis for such assertions: "Believe JR Wants It All - It seems that JR's lack of support for the stock is because he wants to take it private and orchestrates his press releases to drive drown the stock. Since he owns 50 percent of the stock, it would be simple to buy out the other 50 percent on a vote." Comment: Mr Holloway DOES NOT OWN or control 50% of the stock. He owns or controls (via family trusts, etc.) approximately 25% of FGH. Mr. Holloway has on PAPER seen the Market Valuation of his investment in FGH decline to a fraction of what it once was. Putting management style and professionalism aside, Mr. Holloway has more at stake than any other investor in this Company. It is in his own best interest and that of other stock holders that he succeed in his long term goals to grow Friede Goldman Halter, Inc. and to continue building on his past successes of increasing stockholders equity. While there are many bumps in the road, the future of the Company rests with the DEMAND for state of the art equipment for offshore exploration and development over the next two decades. While 4Q/99 earnings are a disappointment it should not have been a BIG surprise. The costs of the merger was several million (including $3m to Jeffries for a successful merger)and the costs of closing down offices and facilities in the synergy process of achieving future efficiencies HAD to effect the bottom line. Since the process is on going, I would not be surprised to see further charges over the next couple of quarters (including the current one 1Q/00). How these charges affect Cash Flow and overall profitability during the interim are OPEN questions. Outcomes of the disputes with Ocean Rig and Petrodrill over the 4 contracts will most certainly effect both WHILE negotiations continue. During the interim, rumor mongering DOES NOTHING to advance the primary interests of Value Investors who expect long term, positive results from their investments. As previously stated, I will continue to support the Company and my own investment as long as I believe FGH has a promising future. I have seen nothing so far that would alter that view. Good luck to all, SargeK