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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: alburk who wrote (27580)	2/6/2003 8:33:17 AM
From: isopatch	Read Replies (1) \| Respond to of 36161

Hello, Andrew. Got any easy questions?<g> All kidding aside, yes I'm always concerned about NG demand contracting further due to the weak economy. It's really a battle of the bands as supply and demand take turns leading their respective contraction curves. Remember, supply has been also contracting, for many months, due to high well depletion rates and a continuing low rate of new well drilling. Canadian drilling has improved, but their current supply situation is still fairly tight with not much new gas left over to pipe down to us. AFA your question about the disconnect between NG prices and the prices of NG company equities? My view is different than the few pieces I've had time to read elsewhere. What I think we're seeing is a more profound migratory movement of capital from financial assets to commodities. Let's think about that for a minute. All stocks and bonds, even those "derived" from commodity based industries, are still financial - aka paper assets. They are an indirect way of playing the respective underlying commodities. By moving into commodities futures contracts - without using margin - conservative investors are moving a large step closer to owning the commodity itself. Eventually, as we saw in the 1970s, the final phase of a bull cycle in a commodity sector occurs when the capital begins to move from commodity markets to a new generation of investors getting their feet muddy via buying working interests in NG producing properties, highly prospective acreage, direct royalties and drilling deals. Very few on these web threads have the industry background and experience to evaluate such opportunities and should stay with the more liquid and marketable vehicles available in the commodities or securities markets. Having said that, you can expect the big Wall Street brokerage firms will be pushing drilling partnerships again in a year or two. As always, be carefull out there, folks. Isopatch