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

To: Think4Yourself who wrote (65005)	4/20/2000 3:50:00 AM
From: cherrypitter	Respond to of 95453

These analysts very optimistic for E & P upside potential. Strong Earnings Seen for Oil/Gas Exploration Firms By Andrew Kelly HOUSTON, April 19 (Reuters) - U.S. oil and gas exploration and production companies are expected to report vastly improved first-quarter earnings in the next two weeks, reflecting a dramatic turnaround in energy prices from a year ago. Analysts who track the sector say solid supply and demand fundamentals for oil and gas and the companies' relatively modest recent stock price performance augur well for earnings for the rest of the year and point to further upside for their stock. Unlike major integrated oil companies such as Exxon Mobil Corp., most exploration and production companies focus solely on finding and producing hydrocarbons. Most do not refine oil and sell gasoline, nor do they make petrochemicals. In the first quarter of 1999 low oil and gas prices wiped out profits for companies such as Burlington Resources Inc., Apache Corp., Anadarko Petroleum Corp.. But for the first quarter of 2000 average benchmark U.S. oil prices were more than double their levels of a year ago at about $28.80 a barrel while average benchmark U.S. natural gas prices were 46 percent higher at about $2.60 per thousand cubic feet. Consequently analysts expect Burlington Resources to post net income per share of 35 cents for the first quarter of 2000, compared with break-even a year earlier, according to data compiled by First Call/Thomson Financial. Apache and Anadarko are expected to report net income of 92 and 32 cents per share respectively versus losses of 4 and 8 cents per share respectively. Burlington will report earnings on April 20 while Apache and Anadarko both report on April 27. "First quarter earnings will be terrific," said Credit Suisse First Boston analyst Phillip Pace. Analysts said that while oil prices will face increasingly challenging year-earlier comparisons as this year progresses, the outlook for gas prices was bullish. "I think the first quarter will be the beginning of positive comparisons that probably extend through 2001 on the gas side," said Bob Christensen of FAC Equities. Analysts said current gas futures prices of over $3 per thousand cubic feet were unusually strong for what is usually the slack "shoulder" period between winter and summer peaks. Pace predicted a "screaming shortage" of gas later this year as U.S. production and imports fail to keep pace with booming demand, led by the increasing use of gas for power generation. Analysts said the outlook for oil was also encouraging, because global demand was rising again and OPEC producers were unlikely to oversupply the market, despite their decision earlier this year to raise production, a move which brought U.S. oil prices back to the mid $20s a barrel from peaks above $30. U.S. exploration and production stocks rallied strongly from March 1999, supported by OPEC production cuts that sparked the recovery in crude oil prices, but were hit hard by profit-taking and rotation into technology stocks from September 1999. The Standard & Poor's oil exploration index , which is made up of six exploration and production stocks, ended up with a gain of 17 percent for 1999 and is up about seven percent so far this year. Based on comparisons with previous oil and gas industry cycles Christensen believes there is 70 percent further upside ahead for exploration and production stocks, adding that his favourite picks included EOG Resources Inc. and Devon Energy Corp.. Pace, whose favoured stocks include Burlington Resources Inc. and EOG, believes the sector can show stock price appreciation of 35-40 percent in the next 6-9 months, after gains last month corrected what he termed "silly undervaluation". "What you're counting on from here is more of a reversion to a peak-valuation scenario, but given the strong underlying fundamentals, I don't think that's actually an unreasonable expectation at all" he said. On Wednesday Burlington closed 1-7/16 firmer at 38-1/2, Apache gained 2 at 48-1/2 and Devon was up 1-1/2 at 45-15/16, as exploration and production stocks were supported by stronger U.S. crude oil futures, which closed $1.27 higher at $27.35 a barrel. Burlington remained well below its 52-week high of 47-10/16 but Apache and Devon moved within sight of their respective 52-week highs of 51-1/2 and 49-13/16.