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

To: Douglas V. Fant who wrote (65809)	5/8/2000 12:11:00 PM
From: JungleInvestor	Read Replies (1) \| Respond to of 95453

Doug, my favorite laggard is EEX. The Tesoro properties they purchased are lower risk, onshore gas in south Texas. They've hit 6 of 7 wells since the purchase. They are selling at about 1x cash flow and just completed a major refurbishment of their largest asset - a floating production system. They are in the process of leasing this out, which will "significantly" increase cash flow (which will mean their current stock price of 2 3/4 per share will then be a fraction of cash flow. Book value is about $7/share). They are in the process of drilling their 3rd well at Llano in the deepwater Gulf to delineate this field (Note: in the Auger-Llano-Bald Pate mini-basin, there have been 10 discoveries out of ten exploration wells by various operators, so EEX is focused on its Llano property in this basin with its partners Exxon, Enterprise and Pan Canada). They got stuck in this Llano well at 23,090 feet so they are doing a fourth side track to reach their TD of about 25,000 feet, which will take about another month. The company release states "Before the tools became stuck, the Company observed hydrocarbon-bearing sands that appear to correlate to, be thicker than, and be structurally high to the uppermost pay sands observed in the Llano No. 1 well." Llano has the potential to be a billion barrel discovery (of course it is high risk, high cost drilling that may not pan out). Their stock price plummeted from about $30 to a low of almost 2 when they encountered dry holes at their Mackeral and George deepwater properties. For a smaller E&P, they have a large inventory of deepwater GOM prospects and they are partnering with Enterprise to reduce risk. I really like their strategy of financing their deepwater exploration with the dependable cash flow of their on-shore properties. They are also drilling near existing pipeline and infrastructure in order to reduce costs. EEX management seems to be making the right moves. I reallocated my portfolio to give the highest weighting to EEX instead of SEV, since EEX also has a very high potential with much less risk. IMO, it is a rocket waiting to be launched when investors discover this laggard (which could come as soon as Wednesday when they release earnings before the market opens).