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

To: Second_Titan who wrote (83134)	12/31/2000 3:04:38 PM
From: excardog	Respond to of 95453

Sunday December 31 8:58 AM ET Oil Companies Hoping for Repeat of 2000 By Paul Thomasch NEW YORK (Reuters) - Cheshire Cat smiles should cross the faces of oil executives this week as they reflect on a year of record profits, scorching energy prices, and blockbuster acquisitions in an industry which has rarely seen better times. Yet the oil industry isn't without its worries for the coming year -- even if they aren't as nerve-racking as the layoffs, plants closures, and slowing sales being fretted over elsewhere in the corporate world. For many of the industry's top brass, the number one concern is convincing investors their stock is worth owning. ``I've been in the industry for 25 years and have never seen a share performance that went against record earnings,'' said Fadel Gheit, an analyst with Fahnestock & Co. in New York. Although stocks of smaller exploration and production companies such as Anadarko Petroleum Corp. (NYSE:APC - news) have jumped this year, he noted, industry powers like Chevron Corp. (NYSE:CHV - news) and BP Amoco Plc. (NYSE:BP - news) haven't fared nearly so well. ``The most startling development for this industry is the disappointing (share) performance of the major integrated oils,'' he said. Witness the Standard & Poor's index of international oil companies, which has climbed just 8 percent in the past year. All the while, oil and natural gas prices were moving steadily toward decade or all-time highs, companies were posting never before seen profits, growing through acquisitions, and buying back their stock even if investors wouldn't. Purse Strings Despite share repurchases by most of the major oil companies -- including Exxon Mobil Corp. (NYSE:XOM - news) and Chevron -- they still hold war-chests of cash thanks to sky high energy prices. Exactly how they will use it remains to be seen, since few seem willing to spend freely on new exploration and production projects out of fear of an oil price crash. The biggest exception has been Royal Dutch/Shell Group (RD.AS) (SHEL.L), which earlier this month said it would increase spending by about 43 percent in 2001. But most others, including Unocal Corp. (NYSE:UCL - news), plan to spend only modestly more in 2001 than in 2000. ``I think you'll continue to see capital discipline in the industry,'' predicted Gene Nowak of ABN Amro. ``While their purse springs will open, they will only spend conservatively.'' Which means companies still have a great deal of cash on hand -- to use one way or another. One route may be issuing special dividends to shareholders, said Tyler Dann of Banc of America. ``If they are not going to spend the cash, how do they return money to shareholders?'' he asked. ``Say we continue to see a windfall situation, then we're going to go beyond stock buybacks and into extraordinary dividends.'' Closing The Gap Not surprisingly, oil prices will be the most pressing concern for energy companies in the coming year. Already in the last month oil prices have dropped more than 20 percent to $26 a barrel, and some reckon they could fall as low as $18. For the most part, however, experts believe that prices will find a home between $23 and $26 a barrel, which could play into the hands of companies chasing acquisitions in the new year. ``When you have a very wide range of oil price expectations, it's difficult to bridge the gap between buyer and seller,'' said Fahnestock's Gheit. ``But if oil prices stabilize in the mid to low 20s, it makes for a good medium in which to conduct mergers and acquisitions.'' Which isn't to say that the industry didn't see its fair share of deals in 2000. Chevron unveiled plans to buy Texaco Inc. (NYSE:TX - news) for $34 billion in stock, while BP completed its takeover of Arco and Italian oil major Eni (ENI.MI) swooped in to buy Britain's Lasmo Plc (LSMR.L). Opening Doors Would lower crude prices mean the good times are all over for the major oil companies? Not necessarily. For one, a modest drop in crude prices would help integrated concerns -- those that produce oil and refine it into petroleum products -- lift profit margins on gasoline and heating oil. What's more, natural gas prices are at record highs, making up for some of the revenue lost by a drop in oil prices. ``If 2000 was the year of oil, then 2001 will the year of natural gas,'' said Fahnestock's Gheit, predicting a run of new natural gas projects in the supply-short United States. It will also be the year of a new U.S. president. And George W. Bush (news - web sites) should bring with him a new energy policy, one that might include opening 1.5 million acres of Arctic National Wildlife Refuge to drilling. The Middle East could open up as well in the coming year. Already, Saudi Arabia is opening its doors to investment; Kuwait is on the same path; and some expect U.S. sanctions to be lifted shortly on Iran and Libya. ``You're going to see a big move into the Middle East this year,'' predicted Banc of America's Dann. ``I think the Iran-Libya sanctions will whither on the vine later this year. There is a new administration and consensus seems to be building in both houses of Congress that these unilateral sanctions have not really worked,'' he said. Email this story - View most popular \| Printer-friendly format Archived Stories by Date: Dec 30 Dec 29 Dec 28 Dec 27 Dec 26 Dec 25 Dec 24 Dec 23 Dec 22 Dec 21 Dec 20 Dec 19 Dec 18 Dec 17 Dec 16 Dec 15 Dec 14 Dec 13 Dec 12 Dec 11 Dec 10 Dec 09 Dec 08 Dec 07 Dec 06 Dec 05 Dec 04 Dec 03 Dec 02 Dec 01