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

To: excardog who wrote (83286)	1/3/2001 10:26:06 AM
From: Terry D	Read Replies (2) \| Respond to of 95453

Bear cuts UCL on price - MarketCap: $9.4 Billion Index: NYSE Composite, S&P 500, Russell 1000 Frederick P. Leuffer, CFA - Integrated Oils We downgraded UCL to Neutral from Buy based on valuation — the stock has reached our target price. Although we believe UCL's operating and financial outlook is positive, and continued strength in natural gas prices and exploration success could support UCL’ s stock near term, we believe upside potential is limited. Our outlook for a material decline in oil and gas prices in 2001 suggests that investment timeliness is poor. In the past, we have regarded UCL as an attractive takeover candidate. Recent management changes and the current valuation make it unlikely that an acquisition would occur at a significant premium. We have increased our 2000 earnings and cash flow estimates by $0.10/share, respectively, owing to higher than expected natural gas realizations in the U.S. We estimate UCL's Q4 average U.S. gas realization at $5.45/mcf, up from $4.26/mcf in Q3. Q4 results, expected will be affected by exploration results from two deepwater Gulf of Mexico exploration wells. The first well, Timon, has been widely reported as a disappointment. A poor showing at Timon could negatively influence development plans at K2. Net costs could total $27 million including past drilling expenses. The second well, Dana Point, is expected to be complete in the next week to 10 days. This well is likely to cost at least $20 million net to UCL. If these two wells are dry, earnings could be penalized by $0.08/share. UCL also is drilling the Chi Chi prospect on the Gulf of Mexico shelf. Well costs are expected to total $6-$7 million. Bear Stearns: 12/00E $3.25 from $3.15; Q4 $1.07 from $0.97 12/01E $2.25 Consensus: 12/00E $3.19; Q4 $1.01 12/01E $2.96 Consensus Rating: 2.0 (Last Updated 12/29 )

To: excardog who wrote (83286)	1/3/2001 11:24:28 AM
From: Evolution	Respond to of 95453

There you have it... Prudential report on XOM... EQUITY RESEARCH JANUARY 3, 2001 XOM: REDUCING XOM TO HOLD FROM ACCUMULATE BASED ON VALUATION TARGET PRICE IS $84. ExxonMobil XOM \| 86.94 \| NYSE Michael Mayer • 650.320.1620 • michael_mayer@prusec.com Current: Hold Andrew F. Rosenfeld • 650.320.1632 • andrew_rosenfeld@prusec.com Prior: Accumulate Risk: Low Target: $84.00 FY Rev (mil) EPS P/E 1Q 2Q 3Q 4Q Actual 12/99 $2.38 36.5X $0.46 $0.53 $0.62 $0.77 Current 12/00 $4.70E 18.5X $0.95A $1.18A $1.22A $1.35E Current 12/01 $4.65E 18.7X Target price based on $20/bbl WTI, $3/mcf U.S. natural gas, and normalized downstream and chemical margins. * All EPS actuals and estimates exclude special items and are fully diluted. Estimates rounded to the nearest $0.05. Avg. Volume: 5,700,000 Div / Yield: 1.80 / 2.07% EPS Growth NA Market Cap: $302,220 mil 52-Week Range: 95 - 70 P/E / Growth NM Shares: 3,476.19 mil ExxonMobil (XOM), headquartered in Irving, TX, main activities are exploration for and production of crude oil and natural gas; refining, marketing, supply, and transportation of petroleum products; and the manufacturing and marketing of petrochemicals. HIGHLIGHTS · The Major Oils have outperformed the market by 13 percentage points since mid December (Oils up 9%, S&P 500 down 4%). · We remain bullish on the operating and earnings outlook for the sector. We continue to forecast that these key earnings and valuation drivers will average well above normal levels over the next 12-18 months. · However, given the recent sharp outperformance, the group is now discounting $20/bbl oil. All of the major oil stocks are at or near our target prices and the group now has an average of only 15% upside potential. · We are therefore reducing XOM to Hold from Accumlate. XOM is 6% above our $84 target price and has 3% upside potential. DISCUSSION The Major Oils have outperformed the market by 13 percentage points since mid December (Oils up 9%, S&P 500 down 4%). About one-fourth of this outperformance occurred yesterday after Saudi Arabia unequivocally stated its support for a production cut of about 1.5 million b/d. The major oils have moved from the bottom quartile of their 15-year historical relative valuation range to fair value in only 11 trading days. The market is now factoring in a significant OPEC production cut, which was the basis for our very bullish upgrade to a 150% weighting on December 15. We remain bullish on the operating and earnings outlook for the sector. Oil prices, U.S. gas prices, and U.S. refining margins all hit 15-year highs in 2000, with natural gas prices and refining margins ending the year near all time highs. We continue to forecast that these key earnings and valuation drivers will average well above normal levels over the next 12-18 months. This should result in excellent earnings, very high free cash flow, substantial debt reduction for the more leveraged companies (COC, MRO, P, and TX), and large share buybacks for the under leveraged companies (BP, XOM, RD and SC). However, given the recent sharp outperformance, the group is now discounting $20/bbl oil. All of the major oil stocks are at or near our target prices and the group now has an average of only 15% upside potential. Target prices are based on normalizing $20/bbl oil, $3.00/mcf U.S. natural gas, and midcycle refining margins while upside potential is based on normalizing $23/bbl oil, $3.75/mcf gas, and midcycle refining margins. Both are relative to the market. See the table below and page 3. We are therefore reducing our recommended weighting to 100% of a market weighting from 150% and cutting all stock ratings to Hold. Recent Target Price Upside Potential Rating Price $/sh %Chg $/sh %Chg BP (BP) Accum to Hold $49 $49 1% $52 7% Chevron (CHV) Accum to Hold 86 85 -1% 97 12% Conoco A (COCa) Strg Buy to Hold 29 29 2% 35 22% Conoco B (COCb) Strg Buy to Hold 29 29 0% 35 20% ExxonMobil (XOM) Accum to Hold 89 84 -6% 92 3% Marathon (MRO) Accum to Hold 28 29 2% 38 36% Phillips (P) Strg Buy to Hold 57 60 5% 77 34% Royal Dutch (RD) Accum to Hold 63 61 -2% 65 3% Shell (SC) Accum to Hold 50 50 0% 52 3% Texaco (TX) Strg Buy to Hold 63 65 4% 74 19% Source: Prudential Securities Estimates. ************************************

To: excardog who wrote (83286)	1/3/2001 11:29:24 AM
From: Evolution	Respond to of 95453

One more prudential report on Major Oil stoks ---------------------------- EQUITY RESEARCH JANUARY 3, 2001 MAJOR OIL STOCKS - REDUCE TO MARKET WEIGHTING FROM 150% WEIGHTING BASED ON PRICE Oil - Integrated Opinion Michael Mayer • 650.320.1620 • michael_mayer@prusec.com Current: Hold Andrew F. Rosenfeld • 650.320.1632 • andrew_rosenfeld@prusec.com Prior: -- Risk: -- HIGHLIGHTS · The Major Oils have outperformed the market by 13 percentage points since mid December (Oils up 9%, S&P 500 down 4%). · We remain bullish on the operating and earnings outlook for the sector. We continue to forecast that these key earnings and valuation drivers will average well above normal levels over the next 12-18 months. · However, given the recent sharp outperformance, the group is now discounting $20/bbl oil. All of the major oil stocks are at or near our target prices and the group now has an average of only 15% upside potential. · We are therefore reducing our recommended weighting to 100% of a market weighting from 150% and cutting all stock ratings to Hold. DISCUSSION The Major Oils have outperformed the market by 13 percentage points since mid December (Oils up 9%, S&P 500 down 4%). About one-fourth of this outperformance occurred yesterday after Saudi Arabia unequivocally stated its support for a production cut of about 1.5 million b/d. The major oils have moved from the bottom quartile of their 15-year historical relative valuation range to fair value in only 11 trading days. The market is now factoring in a significant OPEC production cut, which was the basis for our very bullish upgrade to a 150% weighting on December 15. We remain bullish on the operating and earnings outlook for the sector. Oil prices, U.S. gas prices, and U.S. refining margins all hit 15-year highs in 2000, with natural gas prices and refining margins ending the year near all time highs. We continue to forecast that these key earnings and valuation drivers will average well above normal levels over the next 12-18 months. This should result in excellent earnings, very high free cash flow, substantial debt reduction for the more leveraged companies (COC, MRO, P, and TX), and large share buybacks for the under leveraged companies (BP, XOM, RD and SC). However, given the recent sharp outperformance, the group is now discounting $20/bbl oil. All of the major oil stocks are at or near our target prices and the group now has an average of only 15% upside potential. Target prices are based on normalizing $20/bbl oil, $3.00/mcf U.S. natural gas, and midcycle refining margins while upside potential is based on normalizing $23/bbl oil, $3.75/mcf gas, and midcycle refining margins. Both are relative to the market. See the table below and page 3. We are therefore reducing our recommended weighting to 100% of a market weighting from 150% and cutting all stock ratings to Hold. Recent Target Price Upside Potential Rating Price $/sh %Chg $/sh %Chg BP (BP) Accum to Hold $49 $49 1% $52 7% Chevron (CHV) Accum to Hold 86 85 -1% 97 12% Conoco A (COCa) Strg Buy to Hold 29 29 2% 35 22% Conoco B (COCb) Strg Buy to Hold 29 29 0% 35 20% ExxonMobil (XOM) Accum to Hold 89 84 -6% 92 3% Marathon (MRO) Accum to Hold 28 29 2% 38 36% Phillips (P) Strg Buy to Hold 57 60 5% 77 34% Royal Dutch (RD) Accum to Hold 63 61 -2% 65 3% Shell (SC) Accum to Hold 50 50 0% 52 3% Texaco (TX) Strg Buy to Hold 63 65 4% 74 19% Source: Prudential Securities Estimates. ***********************************************

To: excardog who wrote (83286)	1/3/2001 11:33:41 AM
From: Evolution	Read Replies (3) \| Respond to of 95453

Prudential report on Refiners ----------------------------- EQUITY RESEARCH JANUARY 3, 2001 REFINERS - REDUCING RATINGS BASED ON VALUATION BUT REMAIN OVERWEIGHTED Independent Refiners Opinion Michael Mayer • 650.320.1620 • michael_mayer@prusec.com Current: Accumulate Andrew F. Rosenfeld • 650.320.1632 • andrew_rosenfeld@prusec.com Prior: Strong Buy Risk: Low HIGHLIGHTS · Group outperformed 45 percentage points in 2000 (refiners up 35%, S&P 500 down 10%). · Refining fundamentals remain very attractive, margins currently near all time highs. · Expect margins and earnings to remain above normal in 2001, our EPS estimates are 5% above consensus. · Stocks now near our target prices, but still have 25% upside potential. DISCUSSION U.S. refining margins averaged $6.30/bbl in 2000, their highest average ever, and ended the year at $9.20/bbl an all time high. The refiners tracked this surge in margins and rose 35% on average in 2000, while the S&P 500 declined 10%. The sector is now discounting $4.70/bbl and the stocks are near our target prices, which are based on normalizing $4.55/bbl, but still have 25% upside potential. The fundamentals of the U.S. refining industry remain very attractive. A combination of very good economic growth, reduced investment in new capacity, low product inventories, industry consolidation, and more stringent product specifications led to a very strong increase in refining margins in 2000 to an average of $6.30/bbl. This was the highest annual margin on record. We believe the fact that this remarkable margin improvement was achieved against a backdrop of very high oil prices is further evidence that the underlying economics of the business have improved substantially. Industry earnings have followed margins, and we forecast them to more than triple in 2000 versus 1999. We are forecasting a 15% drop in refining margins in 2001 to a still excellent $5.35/bbl, which is 18% higher than our normalized estimate of $4.55/bbl. However, we expect industry earnings to be essentially flat versus 2000, with higher marketing margins and the full-year benefit of 2000 acquisitions more than offsetting lower refining margins. There are no changes to our margin or earnings outlook. While we expect margins to trend down, they should remain well above normal for the next 12 months for the following reasons: The expected downward trend in oil prices to an average $25/bbl this year compared with $30.25/bbl in 2000 should reduce feedstock costs. With product inventories lean, we think market conditions will most likely allow refiners to reduce product selling prices at a slower rate than the drop in oil prices and thus enjoy some margin expansion. Heating oil inventories remain very low, virtually assuring excellent margins this winter. Refiners are expected to produce more heating oil over the next few months at the expense of gasoline production. This raises the probability that gasoline inventories will be low going into this year’s summer driving season. Significant refinery maintenance was deferred in 2000 as refiners struggled to manufacture sufficient gasoline and heating oil in order to build inventories in 2000. We believe this increases the probability of unscheduled downtime and supply disruptions in 2001. Investment Conclusion: Reducing Ratings Based on Valuation But Remain Overweighted While we forecast refining margins to trend down, they should remain well above normal for the next 12 months. This should lead to excellent earnings and very high free cash flow, resulting in substantial debt reduction across the industry, as well as meaningful share buybacks. The market has taken notice of these excellent margins, with refiners outperforming by 24 percentage points over the past month (refiners up 17%, S&P 500 down 7%) and 45 percentage points in calendar year 2000. The group is now near our target prices, based on normalized margins. The stocks could trade through our target prices and approach our upside potential (up 25%) if the market became willing to discount the high end of the margin range. Please see our reported dated September 18, 2000, initiating coverage of the Refiners for a detailed discussion of our valuation model. We are revising our company ratings based on recent price performance: Sunoco is being downgraded to Accumulate from Strong Buy. It is now 4% below our target price of $34 and has 24% upside potential. Tosco is being downgraded to Hold from Accumulate. It is now 11% above our target price of $31 and has 15% upside potential. UDS is being downgraded to Hold from Accumulate. It is now 5% above our target price of $30 and has 26% upside potential. Valero is being downgraded to Accumulate from Strong Buy. It is now 2% below our target price of $37 and has 34% upside potential. Recent Target Price Upside Potential Refiners Rating Price $/sh %Chg $/sh %Chg Sunoco (SUN)* Strg Buy to Accum $33 $34 4% $40 24% Tosco (TOS) Accum to Hold 34 31 -11% 40 15% UDS (UDS) Accum to Hold 31 30 -5% 39 26% Valero (VLO) Strg Buy to Accum 36 37 2% 48 34% Sunoco does not include the effect from the discontinued lubricants operation or the recent Aristech acquisition. Source: Prudential Securities estimates. ****************