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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 (60472)	2/17/2000 10:25:00 AM
From: Terry D	Read Replies (1) \| Respond to of 95453

Fred Leuffer - Bear Stearns - Energy What's Wrong with Oil Stocks? Three factors have contributed to the fall in oil stock prices during the past four months. 1) Portfolio shifts to growth stocks (mostly technology); 2) a faster-than-usual discounting of future oil prices; and 3) following the Federal Trade Commission? s (FTC) attack on BP Amoco? s merger with Atlantic Richfield, the belief that oil mergers are dead. Our work suggests that major oils reflect an average oil price of $16 per bbl, or $14 per bbl below the current price. In our view, the stocks represent excellent value, based on what appears to be a conservative assumption for oil prices. The oils are oversold, and several of the major oils trade at prices at or below those last seen when oil prices were $11 per bbl ?? many stocks are below private market value. Several catalysts could spark a rally in the oils. A drop in oil prices could serve to fulfill expectations and elevate a major uncertainty for this sector. At that point, investors might feel more comfortable reestablishing holdings. Alternatively, oil price expectations could change if OPEC does not raise production enough to close the supply/demand gap. This could lead to fears of rising inflation, and portfolio shifts may reverse ?? out of growth and into inflation hedges, like energy. In addition to macro factors, we believe that positive earnings surprises, share buybacks, and another round of acquisition activity are likely to lift share prices. The best values combined with the best prospects include Amerada Hess (AHC ? Buy), Chevron (CHV ? Buy), Philips Petroleum (P ? Attractive), Royal Dutch/Shell Transport and Trading (RD/SC, Attractive/Buy).