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

To: Bernie Diamond who wrote (71413)	8/23/2000 1:13:25 AM
From: The Ox	Respond to of 95453

I didn't mean to imply that $18 oil was "just around the corner" as it may not be here for a few years the way things look right now. The point I was attempting to make was that E+Ps who try to put a value on their potential reserves based on $25 oil may be making a big mistake. For the sake of discussion, let's assume that oil stays in the $22-32 range for 2 years and then declines to the $18-20 level afterwards. For many E+Ps, it will take at least 2 years of drilling to get some of their "reserves" into production. If the company is counting on $25 oil to justify their stock's valuation then the above scenario could cause them serious trouble. We've used price to cash flow as an important metric on this thread and this number would be dramatically lower under these circumstances. Do I see oil dropping below $20/bbl in the near future? No way. Is it possible that in 1 or 2 years that market factors may reduce oil's prices to $18/bbl? You bet! We are in the "sweet spot" of the cycle, IMO. We have increasing demand and lower production causing high oil prices. We know that sustained high prices will cause a boom in exploration and production. Until there is a fundamental shift, I'm still very bullish on the patch but I don't see blue skies forever! Hey, maybe I'm wrong and we'll have $30+ oil for the next 20 years?