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

To: Tomas who wrote (75180)	9/30/2000 11:16:53 AM
From: Tomas	Respond to of 95453

Oil and gas investors should ignore the Gore War "Were it not for companies such as Halliburton, Schlumberger, and Global Marine, today's energy situation would compare to the energy crisis of 1974 as colon cancer to temporary indigestion." Financial Post, September 30 By Donald Coxe Oil has not been a big political issue in a long time. It's back. In last week's column I considered the way it affects politics in the U.S., Britain, and Euroland, and the implications for investors. When George Bush chose Dick Cheney as his running-mate, he sought to (1) reassure conservatives that he was, under the skin, one of them, and (2) reassure doubting independents that his administration would have the gravitas and depth to lead the Free World. Subsequent poll results confirmed the shrewdness of that appraisal. Going into the Democratic convention, Bush was ahead by as much as 15 points in the polls. Focus group analysis showed that voters considered Cheney a sound, reliable leader. Then, in Los Angeles, Al Gore launched his war on Big Oil. The liberal media began intensive coverage of Cheney's background as CEO of Halliburton Inc., one of the world's largest oil service companies. Voters learned how rich Cheney had become after leaving politics. They were also energized into rage by daily revelations of Cheney's huge package of stock options that he could keep as Vice-President. Democratic campaigners denounced the "Big Oil" ticket of ex-oilman Bush and current Big Oilman Cheney. Meanwhile, the brief price pullbacks for crude oil and natural gas turned into powerful rallies. Electricity prices in some areas reached record highs. Then, as OPEC dithered, fears of a new energy crisis swept Europe as truckers, farmers and rabble-rousers blocked deliveries of oil and refined products. Suddenly it was 1974 redux: Big Oil and OPEC were the conspiratorial demons with a stranglehold on the global economy. Amid it all, Gore's poll standings rose and Cheney's approval ratings sank to Dan Quayle levels. To my knowledge, not one mainstream media commentator has noted what Halliburton does to the price of oil and gas. Voters are simply reminded relentlessly it is a big oil company getting rich from soaring energy prices and OPEC's evil machinations. In reality, Halliburton earns its money by helping oil companies find more oil and gas. It is a part of the solution, not part of the problem. Were it not for companies such as Halliburton, Schlumberger, and Global Marine, today's energy situation would compare to the energy crisis of 1974 as colon cancer to temporary indigestion. Oil service companies were important in 1974, but they are crucial now. The 1980s collapse in prices of oil and gas transformed the oil industry. Major oil companies switched their attention from finding hydrocarbons to finding profits. Finance experts took over executive suites from petroleum geologists. This week I had a chance to review that history in a Chicago meeting with management of Really Big Oil, also known as Exxon Mobil Corp. The niggardly returns oil investors have earned in the past two decades have driven energy stocks from a 29% weighting in the S&P 500 to 5.6%. Investors in Big oil have taken a big beating. No more. Head office staffs at the major companies have shrunk as exploration and production have been largely outsourced to oil service companies. Even last year's runup in oil and gas from post-1960 real (inflation-adjusted) prices to lipsmacking levels didn't send Big Oil rushing to drill anywhere at any cost. Twice-bitten, twice shy is the message to investors. The U.S. industry has failed to replace its gas production for six years. In part, this reflects disappointing production profiles from undersea wells in the Gulf of Mexico, the last elephant frontier in the lower 48 states. (Wells produce big flows initially, but then subside rapidly into modest output.) In part, it reflects the caution of head office bean counters. The oil story is similar. To maintain output, Big Oil is being forced to take Big Risks to find oil in unstable countries such as Nigeria, Angola, Kazakhstan and Russia. Venezuela, the U.S.'s largest supplier, is headed by a Marxist-leaning dictator whose heroes are Che Guevara and Fidel. The Middle East is again at risk as Saddam enriches himself from US$30 oil and refuses international inspection of his facilities for making biologic and nuclear weaponry. Oil and gas stock investors should ignore the Gore war. Regrettably, U.S. voters may not, which will have other unpleasant consequences, but will not savage Big, Medium, or Little Oil -- or Halliburton. _________ Donald Coxe is the chairman of Harris Investment Management of Chicago and Jones Heward Investments; don.coxe@harrisbank.com