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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: SofaSpud who wrote (7710)	10/17/2000 11:57:11 AM
From: GVTucker	Read Replies (1) \| Respond to of 24905

SofaSpud, in the old days, the market for oil and gas stocks, particularly in the E&P sector, was screwed up. Stocks traded at cash flow multiple premiums when commodity prices were high. Stocks traded at cash flow multiple discounts when commodity prices were low. That is contrary to what common sense would tell us. That environment created great trading opportunities. Unfortunately, that environment lost a lot of people money, particularly fund managers who didn't understand the industry. These same fund managers now look at the last two decades and see that companies that have truly created value on a long term basis in E&P are very few and far between. Thus, they first take the logical step and discount current cash flows for more normalized prices. Then, they take an illogical step and conclude that E&P companies in general will continue their wasteful ways and blow the current bonanza just like they blew the bonanzas of booms past. Thus, we have the current situation. Stock prices aren't as attractive as they were in the late winter of '99, when the market was still operating under the silly old rules and was trading at low cash flow multiples in a period of low commodity prices. Still, the extreme cash flow discounts make the stock halfway decent buys now.