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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: isopatch who wrote (13528)	1/2/2002 1:19:57 PM
From: Bob Rudd	Read Replies (2) \| Respond to of 78535

isopatch: Trying to get some feel for average earning capability for EPEX, I took averages of last 5 years diluted EPS, normalized eps [whatever Market guide means by that?], and 4 years pro-forma eps and got -0.2034, 0.1678, & -0.25 respectively. Averaging those three, I got -0.0952. The very low PE you cite is based on last years gas bubble. Next years estimate of .53, probably reflects some lock in, but methinks the value should reflect average earning power over the cycle. I haven't looked at proven reserves or other asset based qualities and am interested to hear your take on whether the above is valid way to look at NG's.

To: isopatch who wrote (13528)	1/2/2002 6:00:51 PM
From: MCsweet	Read Replies (1) \| Respond to of 78535

Isopatch Just my opinion, but I would only load up partially on natural gas stocks right now. Natural gas prices are continuing to crater with a huge amount of storage in the ground. Gas could fall quite a bit more in the next couple of months. Personally, I am hoping for the gas glut to drop prices a bit more, at which time I would buy up as the long term prospects of the industry appear to be solid. MC

To: isopatch who wrote (13528)	1/2/2002 9:40:16 PM
From: Don Earl	Read Replies (1) \| Respond to of 78535

<<<EPEX has no LT debt, sells for less than book value,>>> Keep in mind most exploration companies use full cost accounting and EPEX is no exception. Typically, only 40% of wells drilled produce. That means roughly 60% of book value is the cost of digging dry wells on most of these companies. It looks great on paper, but the resale value of dry wells is zero. Capitalizing these expenses as assets skews EPS numbers also, as expenses are only incurred as depletion and amortization. Natural gas prices are close to two year lows and there is a glut of natural gas on the market. To make matters worse, MTBE is on the verge of being phased out, and MTBE is made from methanol, which is made from natural gas. I'll give the company credit for zeroing out debt while natural gas prices were at historic highs. With very few exceptions, it's rare to see debt to equity ratios much less than 2 to 1 in oil or oil services. Most of these outfits only source of cash flow is debt or equity offerings, with the main purpose of the business being an excuse to glom onto public money. Unfortunately, if we see anything in the way of recovery in the economy, it's going to have to come at least in part from lower energy prices. I don't think EPEX is a bad pick, but I do think energy stocks are headed toward a prolonged bear market. Capital spending in the sector has all but dried up, and rig count in North America has been falling off steadily since the end of summer.