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

To: Tomas who wrote (67273)	5/29/2000 7:31:00 AM
From: Tomas	Respond to of 95453

Energy stocks bouncing back big - Houston Business Journal, May 29 More than 30 companies hit year highs as capital shifts from tech sector Jim Greer Houston Business Journal New light is shining on old-economy oil and gas stocks. Investors are snapping up energy names with the sort of exuberance that had been reserved for the sexiest high-tech plays. This month, more than 30 Houston energy companies have hit their highest level in at least a year. And as of May 23, more than 20 local oil and gas stocks were up over 50 percent year-to-date. Left in their old-age dust is the technology-laden Nasdaq stock market. Through Tuesday, the Nasdaq composite had dropped 22 percent for the year. While dozens of local oil and gas stocks have roared to 12-month highs, disenchanted momentum investors have continued to bail out of tech. On Tuesday the Nasdaq plunged 6 percent to a new 2000 low. The tech-heavy index limped in below 3165, more than 37 percent off its March 10 peak. In 1999 dot-com mania fueled an unprecedented Nasdaq gain of 86 percent. But this year, the Dow Jones Internet composite index has plunged 43 percent through terrible tech Tuesday. "Money has gone over from tech to energy," says George Gaspar, an oil and gas equity analyst at Robert W. Baird & Co. Yet it's more than one industry's pain being another group's gain. Energy analysts point to enticing fundamentals -- a strong supply-demand picture has lit a fire under oil prices and gas prices. "We've never had a situation when both commodities were doing this well," notes Merrill Lynch analyst John Herrlin Jr., who covers exploration and production companies. UPSIDE SURPRISES Robert W. Baird & Co. on Tuesday raised its target price for crude oil. For the second quarter, the securities firm had expected crude to fall to about $26 a barrel from an average first-quarter price around $29. But now Baird & Co. projects oil will settle in closer to $27 for the period. Various Wall Street analysts this month have scrambled to tack on a couple of dollars to crude oil prices used in their models, Gaspar notes. OPEC has moved to stabilize oil prices. The cartel has said it would adjust output if prices in the OPEC crude basket move out of the $22-to-$28 range, which roughly translates to a range of $24 to $30 for the frequently used price of West Texas Intermediate crude. And for natural gas -- with demand outstripping supply -- prices recently hovered in rarefied air above $3.80 per million British thermal units. Dain Rauscher Wessels equity analyst Steve Smith says, "$3.80 gas and $30 oil works wonders." Reflecting other Wall Street firms, Salomon Smith Barney raised its natural gas price target twice during the first three weeks of this month. In the second increase, Salomon last Friday boosted its full-year 2000 forecast to $3.25/MMBtu from $2.78. "It just looks like energy prices are going to continue to surprise on the upside," analyst Gaspar says. And Wall Street loves upside surprises. So E&P stocks are finally attracting the chart-oriented momentum investors, Herrlin says. In a March 7 research report -- the week Nasdaq topped out at 5049 -- Herrlin appeared prophetic: "Perhaps the paradigm will shift back to some of the stinky old-age industries." Engulfed in Internet mania during the first quarter, investors especially turned up their noses at the exploration and production sector. And as recently as March, a vast majority of E&P stocks remained out of favor. But by May the E&P, oil service and drilling sectors all had been thrust into a leadership role on Wall Street. Indeed, although the exploration and production sector lagged the drilling group for most of 2000, the Salomon Smith Barney E&P composite index had surged more than 50 percent year-to-date as of May 18. In just two full months since slumping to a 52-week low on Feb. 25, locally based EOG Resources skyrocketed 133 percent to a new 12-month high Monday. From its own 52-week low on Feb. 25, large Houston E&P firm Burlington Resources Inc. has jumped more than 40 percent. And leading local independents Apache Corp. and Anadarko Petroleum Corp. are both up more than 50 percent this year. From their 52-week lows to May highs, the upswing in oil and gas drilling stocks has been even more dramatic. "There's a general impression that the drilling business is going to be very strong the second half of the year," Gaspar notes. Some Houston drilling stocks nearly tripled off their 12-month lows. But the sharp upswing has enticed investors to take some profits in the drilling group since mid-May. Smith International Inc., for example, closed below $80 Tuesday, about 10 percent off its May 15 high. Drilling and oil service companies rely on capital spending from the major oil gas companies. And among the majors, "there's still a lot of suspicion" about how long the robust commodity prices will last, Gaspar says. So even as the oil and gas crowd enjoys heady times, it seems to heed a lesson from bygone glee over dot-com stocks. "We're not euphoric," notes equity analyst Herrlin, "but remain steadfastly optimistic." bizjournals.com