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

To: Tomas who wrote (91627)	6/18/2001 10:08:53 PM
From: Ed Ajootian	Respond to of 95453

Houston, You've Got Two Problems Donald Coxe The Financial Post Monday, June 18 Despite week-long torrents from tropical storm Allison, Houston is back. Locals told me with pride that not only are all those "see-through" office towers filled, there are actually new towers being built. I was there as keynote speaker at a large conference of exploration and production companies and to meet with investment banking clients. My message to both groups was a bit different from what they expected. Because I have been recommending oil and gas stocks strongly for two years, some assumed I would tell them to expect a new era of sustained higher prices for oil and gas stocks that would recall the glory years of 1978-80. Not quite. I outlined 10 reasons that the world of 2001 bears little resemblance to the world of the 1970s. Most importantly, inflation remains subdued globally, despite the (recently stalled) run-up in energy prices. Institutional investors aren't going to pay up for inflation hedges, whether in oil or gold. Institutional investors aren't going to pay up for inflation hedges, whether in oil or gold. Although oil and gas stocks have performed beautifully since 1998, they have been in sideways mode recently, despite spectacular earnings gains that zap Street forecasts. There are three reasons for this desultory performance, and only one may be temporary. First, the U.S. industry is not building its hydrocarbon reserves, despite a big pickup in drilling. Second, the industry's splendid discipline in lowering its exploration and production costs shows signs of eroding. Third, oil stocks tend to trade inversely to technology stocks. Nasdaq is currently in recovery mode after bottoming out at 1617, and the Street is telling players to cash oil profits and move them into Nasdaq. The first point should be at least as alarming to President George W. Bush as to the oil industry. The Bush/Cheney energy policy assumes that letting markets work will solve the current energy "crisis." (It's not a crisis to be compared with the 1970s, of course, even for California, where it has been caused largely by latte liberals, not by a global shortage.) The U.S. statistics on natural gas (as published by Morgan Stanley) don't make good reading for oilmen, politicians or consumers. The rig count has virtually doubled since January, 1999, but production per rig is down by nearly 60%. In the Gulf of Mexico, the most important area of gas development in "the lower 48," total production is up just 2% since 1995, while the offshore rig count is up 40%. The second point produced discomfort among many of the oil and gas producers. They all remember the 1980s bumper sticker that read, "Please, Lord, give me another energy crisis. This time I won't screw up." When oil prices collapsed to US$11 and natural gas slumped to US$1.25, the industry went into survivor mode. Not only did it slash drilling, it squeezed costs everywhere. Now, the costs are climbing, even as energy prices slip to levels that would have been deemed fabulous three years ago, but look just OK after the big spikes in 2000. Surprisingly, few of the companies have taken advantage of sky-high futures prices for oil and gas... According to Morgan Stanley, cash costs per barrel of oil equivalent produced rose last year from the five-year average of US$6.89 to US$8.01. Drilling costs rose to US$5.98 from US$5.41. In discussions with participants at the conference, there was agreement that the independents as a group have become much more relaxed about costs, confident that high energy prices will skate them onside. Surprisingly, few of the companies have taken advantage of sky-high futures prices for oil and gas during last year's panic to lock in big profits for coming years. I cited Barrick Gold Corp.'s [ABX] successful policy of selling gold forward, and asked why "black gold" producers didn't emulate it. No one seemed to have a good answer. As to the tradeoff between Nasdaq and oil, they were interested in my argument that the big Wall Street investment banks' strategists have mixed motives behind their recent recommendations to switch from energy into technology. Wall Street's touts are pushing tech stocks again. That means they have to suggest an area for investors to cash profits that can go into technology. To me, that's a stupid switch. Houston's problems are trivial compared to Silicon Valley's. Next week, I'll discuss how those concerns facing Houston are forcing the industry to look to Canada. ((((((((((((((((((((((((((((()))))))))))))))))))))))))))))) Comments anyone?

To: Tomas who wrote (91627)	6/19/2001 11:36:08 AM
From: isopatch	Respond to of 95453

OT/Real Old Testament stuff (from The Times) Not kidding. Iso thetimes.co.uk "Locust army marches on its stomach FROM GILES WHITTELL IN MOSCOW AND OLIVER AUGUST IN BEIJING PLAGUES of locusts are devastating crops from Central Asia to the American Midwest, sending farmers to the book of Exodus for salvation. Not since the Egyptians incurred the wrath of God have so many locusts had their day. A billion-strong army is on the move, stretching far beyond the more normal swarming grounds of Africa and the Middle East and threatening central Eurasia’s arable land in a pincer movement from each end of the Caspian Sea. In China, hundreds of thousands of ducks are being flown to the northwest where locusts are taking over vast dried-out grasslands — in the worst affected areas of Xinjiang province up to 10,000 inhabit one square metre. The ducks are trained by government handlers to feed on the locusts — they can reportedly eat a pound of them a day — and are then flown to the afflicted region. The Government says it is more environmentally friendly than using planes to spray pesticides. Southern Russia’s worst plague of locusts in 40 years is meanwhile advancing north by several miles a day and will start spreading ten times faster if not contained within a week, officials have said. Yesterday the swarm was confined to a 170,000-acre swath of farmland in Dagestan near the Caspian Sea — an area about twice the size of the Isle of Wight — but it had destroyed 30,000 acres of wheat and was eating everything in its path, making the situation critical, according to the Emergency Situations Ministry in Moscow. The insects have hopped and walked inland from the Kuma River estuary like grasshoppers. But experts called to the scene said that they would grow wings within a week, if allowed to, and would then be able to fly up to 30 miles a day. In America, too, an agricultural emergency has been declared in Utah, where the “Mormon crickets” have so far caused $25 million of damage to crops."