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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: kollmhn who wrote (6114)	1/22/2002 9:41:47 AM
From: Tomas	Respond to of 206272

Get ready for oilpatch bargains. Dismal start to year shows sector near a bottom, analysts say Financial Post, Tuesday, January 22 By Steve Maich Canadian oil and gas stocks are off to the worst start of any group in the TSE 300 this year, but a few analysts are telling clients the time to jump back into energy stocks is almost at hand. The TSE Oil and Gas sub-index slid again yesterday, bringing the group's total loss since the start of the year to 5.3%. Pummeled by warmer than usual weather around the world, constant infighting among the OPEC nations and the slowing world economy, oil prices are stuck below US$20 a barrel. Nonetheless, after watching Canadian energy stocks slide 11% in the past eight months, analysts at Harris Partners and Merrill Lynch yesterday told clients to get ready for bargain hunting in the oil patch. When the world economy finally starts to recover later this year, the world's oil and gas industry should be among the first to rebound, according to Merrill's global energy team, headed by analyst Sue Graham. "Weak oil prices are solely a reflection of the worst global recession in oil demand for 20 years," the report said. "Experience suggests that purchasing oil stocks during major pull-backs yields significant outperformance. We believe such opportunities are set to occur during early 2002." With the world energy sector still reeling from backlogged inventories and a rapidly slowing world economy, companies have been moving aggressively to scale back exploration and cut costs. Most analysts are expecting the oil giants to report weak earnings over the next few weeks. That should lead the stocks even lower amid a slew of analyst downgrades, creating buying opportunities, the Merrill report said. And with most companies scaling back exploration and production, the current oversupply of oil and gas could quickly turn into a small shortage if the world economy accelerates, said Ian Ollers, oil and gas analyst at Harris Partners. In a note yesterday, he advised clients to overweight "inexpensive Canadian oil and gas producers. Harris's top picks are Rio Alto Exploration Ltd. and Talisman Energy Inc. "Lack of production replacement and very steep decline curves in Canada and the U.S. set up compelling scenarios for the later half of 2002 and for when the economy recovers," he said. With buybacks and more takeovers in the industry, stocks should be able to withstand the short-term economic weakness, analysts said. Merrill favours the biggest integrated oils such as BP PLC and Exxon Mobil Corp., while Mr. Ollers prefers Canada's specialized producers. The one stock they can agree on is Petro Canada, which Merrill named their top Canadian energy pick, and Mr. Ollers rates a "buy" with a $46 target. But low commodity prices remain the prime concern for most analysts, and strategies for investing in the sector still mostly centre around surviving the lean times that lay ahead, because no one knows for sure how long the drought is likely to last. Dundee Securities Corp. analysts Victor Vallance and Steve Popichak sent a report to clients yesterday, advising them to sell shares of Alberta Energy Co. Ltd. and buy PanCanadian Energy Corp. because the latter should be better able to better cope with the current "commodity price storm." Many investors are still betting the storm hasn't passed. Despite a 35% drop in the price of crude oil since Sept. 11, speculators continue to bet the commodity price has further to fall. On Friday, the Commodity Futures Trading Commission reported that short positions on the price of crude oil on the New York Mercantile Exchange rose 8% in the week ended Jan. 15. smaich@nationalpost.com