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

To: Winkman777 who wrote (81974)	12/18/2000 1:29:38 PM
From: Frank	Read Replies (1) \| Respond to of 95453

Those 20% Cap Ex increases won't translate to greater production. As I understand it, increased drilling and service costs will more than eat up 20 % increases. If those E&Ps want to increase actual production they will have to increase by much more than 20%. Comments welcome-am I correct on this issue?--Frank

To: Winkman777 who wrote (81974)	12/18/2000 1:32:58 PM
From: Winkman777	Respond to of 95453

SSB sees 20.2% capex growth and multiyear cycle. news.moneycentral.msn.com RESEARCH ALERT-Salomon sees E&P spending growth December 18, 2000 1:04:00 PM ET HOUSTON, Dec 18 (Reuters) - Oil and gas companies plan to raise their worldwide exploration and production (E&P) spending by 20.2 percent next year, creating a favorable environment for oilfield service stocks, Salomon Smith Barney said on Monday. The investment bank's comments contributed to a jump in oilfield service stocks, with the main index for the volatile sector showing a gain of almost 8 percent by early afternoon. Presenting the results of its annual E&P spending survey, Salomon Smith Barney said the projected increase would be driven by continued strong growth in North America, in response to high natural gas prices, and a surge in spending in the rest of the world as companies pursue projects that were postponed in 2000. "The shackles of concern that have constrained E&P spending outside of North America finally seem to be loosening," Salomon Smith Barney analysts Geoff Kieburtz and Mark Urness wrote. The projected increase would build on a rise of 18.7 percent in 2000 as E&P spending rebounded after falling 20-25 percent in 1999 following the collapse in oil prices in 1998, they said. "These results strongly reinforce our view that the oilfield service industry is in to the early stages of a multiyear growth phase," Kieburtz and Urness said. The Philadelphia Stock Exchange's oilfield services index (OSX) was likely to move higher once investors became comfortable with the idea that crude oil prices are sustainable at levels above $20 per barrel, they said. "We expect the group to undergo a sustained rally, with the OSX ending 2001 over 150, and perhaps approaching our 12-18 month target of 170," they said. BIG GAIN FOR SECTOR INDEX At 12:30 p.m EST on Monday the OSX <.OSX> was up 8.7 points or 7.9 percent at 118.82, supported by the Salomon Smith Barney survey results, and by gains for both crude oil and natural gas futures. According to the survey, North American E&P spending will rise by 19.6 percent in 2001 after a rise of 40.5 percent this year, while spending in the rest of the world will grow by 20.6 percent next year after an 8.4 percent rise in 2000. Investment in international projects was scaled down from a projected increase of 15.5 percent in Salomon Smith Barney's mid-year survey. In a separate research note Urness forecast that the worldwide count of working oil and gas drilling rigs would rise 23 percent to 2,355 next year from 1,910 in 2000, reaching its highest level since 1985. The increase would be driven by increased drilling for natural gas in North America and by increasing exploration and production activity in the rest of the world, he said. Urness projected that the U.S. rig count would rise by 31 percent to 1,200, the Canadian rig count would rise by 14 percent to 390 and the rig count in the rest of the world would rise 17 percent to 765. Kieburtz and Urness said that among U.S. oilfield service stocks, Smith International Inc.(SII), BJ Services Co.(BJS) and Weatherford International Inc.(WFT) would benefit from their exposure to the booming North American natural gas market. They also recommended Schlumberger Ltd.(SLB) Baker Hughes Inc.(BHI) and Halliburton Co.(HAL) for investors seeking exposure to the accelerating international recovery