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

To: jim_p who wrote (75824)	10/9/2000 10:27:31 AM
From: Think4Yourself	Read Replies (2) \| Respond to of 95453

"There are a lot of people that are beginning to believe that the gas cycle is ending with the exception of some price spikes this winter" Thanks for the info but I am even more skeptical than you. Are these the same people who have been making foolish hedges for the past year? Or maybe they are the ones who got us into this mess in the first place with their "beliefs"? Are they basing these beliefs on their experience from the past few warm winters? Or are they, more likely, basing their beliefs on the past two slightly higher than normal builds (which were mostly due to ideal build weather)? After reading hundreds of 10Q's, 10K's and "analysis" my opinion of the "industry experts" and "insiders" is that most are totally clueless about their own industry. This applies to the entire management chain, right through the CEO. There are only a handful of people who have come close to predicting and acting on what was going to happen this year. Bob Simpson, the CEO of Cross Timbers, is one. If he comes out in the con call and says the situation is changing I'll get nervous. Also don't think much of the analysts who suddenly became wildly bullish this year.

To: jim_p who wrote (75824)	10/9/2000 10:55:35 AM
From: kollmhn	Respond to of 95453

Jim- I posted this on the RRC board on Yahoo. Thought you might like a contrary opinion.by: kollmnh 10/9/00 10:34 am Msg: 8208 of 8209 Here's today's Goldman Sachs comment: "For 2001, we increased our assumption to $3.75 per MCF from $3.25 per MCF previously. As suggested by our quarterly survey on domestic gas production, the dramatic increase in U.S. gas drilling activity witnessed in the last 12 months has yet to arrest year over year declines in U.S. gas output. According to our survey, in the third quarter U.S. gas production was down 0.8% relative to the previous year." Additionally, the said: Near-Term Outlook - Very Strong North American gas supply/demand fundamentals for this winter appear extremely (some would say alarmingly) tight. Assuming that storage injections for the remaining 5-6 weeks of the injection season (usually ending at the beginning of November) average the same as last year, U.S. gas inventories will start the winter (withdrawal season) at a historically low level of 2,600 BCF. Such a low level has not been reported for that time of the year since the American Gas Association has begun its weekly survey in 1996. At the same time, North American gas production appears dormant at best, despite the amazing increase in gas drilling activity since mid-1999. Our quarterly survey that tracks estimated (later reported) U.S. gas production for all majors and 28 E&P and pipeline companies indicates that third-quarter U.S. gas output was down 0.8% year over year for this group (representing about 60% of U.S. gas production). Based on guidance provided to us by these companies, it appears that on average their U.S. gas output will decrease about 0.6% in 2001 (relative to 2000), after falling an estimated 3.7% in 2000. In Canada, storage levels are at a three-year low level as well (of 431.8 BCF compared to the previous two-year average of 460 BCF). This tightness in supply is expected to maintain gas prices at the current high level over the next 4-5 months, especially if combined with a return to normal winter consumption levels. Prices could reach historically high levels (of $6.00-plus per MCF) in case of an especially cold winter." (This is contrary to MWD recent remarks about a .4% indicated increase. Either way, it does not appear that there is any meaningful production increase.) Medium Term: The Main Question is Demand We continue to believe that North American gas production will remain relatively flat over the next 1-2 years, as growth in selected basins will mostly serve to replace declines from the existing base. The 'incongruency' between the level of drilling activity in the last twelve months and the magnitude of production response, while surprising, can probably be explained by: (1) increasing decline rates in the existing production base and (2) smaller reserves and production added per new wells drilled. This decline in well productivity is similar to what has occurred in Canada, where the amount of gas wells drilled increased 68% in the 1996-1999 period, while production has grown less than 7% since 1996. Comparing EIA data on U.S. gas wells completed and reserves added also supports this contention: since 1995, the average amount of U.S. gas reserves added (excluding revisions) per well completed has declined more than 20% (to 1.02 BCF in 1999 from 1.31 BCF). The consumption side of the equation is somewhat more difficult to track and can swing much more dynamically. Assuming gas prices stay above $4.00 per MCF for a prolonged period, most likely some of the most price-sensitive gas consumption (like in the chemical sector that uses gas as a feedstock) will be shed. However, counteracting some (or maybe all) of that demand loss, natural gas should continue to gain market share within the electric generation sector. Most data on new gas-fired plants constructed and planned for the U.S. for the next three years suggests that this development alone could result in 3 plus growth in U.S. gas consumption for the foreseeable future. In turn, we believe that gas prices will remain significantly above the last five-year average of about $2.40 per MCF."