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

To: Douglas V. Fant who wrote (91323)	6/4/2001 8:01:33 PM
From: Roebear	Read Replies (1) \| Respond to of 95453

Douglas, While I tend to agree and believe that NG/Oil prices will find a level to base that will be considerably higher than past boom/bust experience, I am curious to know if your sources gave any reasons for their new found optimism. Best Regards, Roebear

To: Douglas V. Fant who wrote (91323)	6/5/2001 10:13:45 AM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

Doug Fant re: "the change to LT optimism in the patch, toward commodity prices" Doug; out of curiosity - is that change mainly toward Nat Gas Prices ? Personally; I have to wonder "why now" - as far as the change in attitude. Actually - the CEO's & MGMT of E&P's & Service Co's have NOT been very good at predicting either tops, or bottoms in the commodity price cycles - ie: XTO's Simpson buying all that stock in other E&P's at what he saw as the bottom, the Oil Major's predicting $15-$18 Oil thru last year - not believing this price level & the over-building especially in deepwater rigs by the drillers like FLC - which nearly went under because of taking on so much debt at the end of the last cycle & FGH that did go BK etc... What mystifies me here Doug; is that we NOW have higher supply levels than last year, we have a slower economy than last year, we will produce more Oil & Gas than last year, we have more rigs drilling for Oil & Gas than last year and most importantly -> BOTH the US & Global economies are much, much SLOWER than last year... so I have to wonder if that change in optimism "now" - is just another industry "timing faux paus"... actually in all seriousness - I don't wonder - I know it is... PS: the Oil Majors only spent approx 42% of cash flow on Cap Ex last year - much,much lower than their historic average. The Majors are simply not putting their cash where their mouth is ... if your take is that "they" are now bullish. While the earnings for the next few quarters are solid for OS co's - NG prices have fallen faster & further than anyone thought just months & weeks ago & Crude supply levels & the storage build trends & the economy are more indicative here of $18-$20 Oil than $28-$32 Oil. Personally I think that this is the "deadzone" & a time of transition for the patch & this cycle. It is NOT a positive risk vs reward point - quite the opposite actually. Untill BOTH the US & Global economies dramatically improve economically AND the build in supply trend dramatically reverses - I'm neutral on the patch with a slight bearish/short bias - especially on the NG E&P pureplays - they are a "Basket Short" on ALL further strength imo - actually the best play in the patch LT is to short these stocks in a basket - as yes; one, or two more may get bought out at what I think are irrational premiums ala - HSE & BRR etc; but 8 out of 10 NG E&P's will be fractions of present prices within 6-9-18 mos.... it's when, not if they fall & fall hard. Within the next couple of qtrs the E&P's will face negative comps & that's a chipshot short around the bend imo. Good Luck; but I do not understand why the industry just "now" has turned bullish on commodity prices ? After NG fell in half, with the API storage levels indicative of $18ish Oil & with both US & Global economies rolling over ? I just don't understand .... ? Again, the industries track record on commodity price "timing" is rather dismal. I still say the next "Big & Easy Money" Trade in the patch will be a LT "net short" play & I'd rather give up the recent risk of a downside correction or even an end of cycle freefall; playing the longside for the next 10-20 points here - for the no-brainer opp of shorting into anything near a OSX 150+ move... because it's when, not if the cyclical (keyword there CYCLICAL) OSX goes back to the 70's-80's and I want puts for leverage & a portfolio weighting short the Patch if & when the OSX ever see's those levels. That's my take ...and by the way Doug; is it possible that this activity uptick in the last 60 days - is nothing more than a last ditch - mad dash to scramble & get all the Oil & Gas online that they can while prices are still at these levels ? - maybe they see the economy rolling over & see those supply levels building ? - maybe they aren't so stupid after all (VBG) ? - maybe it is merely a scramble to get all they can at these prices - knowing that "these prices" aren't going to stay here very long....