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

To: GREENLAW4-7 who wrote (18035)	2/9/2003 9:27:21 AM
From: quehubo	Read Replies (1) \| Respond to of 206121

Greenie - there are obviously to many variables for you to consider. What is today's NG production vs the Spring of 2001? What direction is the rate of production change going? What was the ramp rate of NG directed drilling into the Winter 2001/2002? Are OSX revenues directly dependent on activity levels or commodity prices? One must consider the stocks within OSX, not value of the index. MVK NBR PTEN BJS WFT NE ESV all show healthy forward earnings expectations. Dont look at SLB HAL RIG GSF.

To: GREENLAW4-7 who wrote (18035)	2/9/2003 10:40:19 AM
From: Ed Ajootian	Read Replies (3) \| Respond to of 206121

Greenie, You made some great points here but then really disappointed by backing out of the discussion in response to Que's points, by saying the market is not telling you to buy yet. I would like to try to stay on this discussion point if possible, because I am becoming very troubled by the disconnect that is occurring here, between the industry fundamentals and the equities market for this industry. First of all, any questions about whether or not we have made a "step change" to $4+ gas should now be completely erased by the latest Short Term Energy Outlook ("STEO") put out by the EIA (see eia.doe.gov ) As we all know, the EIA is notoriously conservative and changes its forecasts to adapt to changing industry fundamentals only with glacial speed. In this forecast, the EIA is calling for average '03 wellhead gas prices to be $4.36/mcf, and for '04 prices to be near the '03 level. Make sure you look at Figure 9 on the STEO -- according to EIA gas prices are gonna start with a "4" (at least) for the next 2 years. Interestingly, the above price forecast was made by the EIA in spite of the fact that the EIA believes we will get back up to 1,000 gas rigs, by sometime in 3Q '03 (see Figure 12). So the EIA believes that this time it _will be different from what happened in '01, in that although we will get up to 1,000 rigs drilling this will only serve to get gas prices down to the low $4's. (Hey Que, I think I'm glad I didn't bet you on those thousand rigs!). So we clearly have solid fundamentals for this industry. Yet the market is ignoring them right now. I believe it is mostly due to folks thinking more along the lines that you are -- making relatively over-simplified comparisons to the past and drawing conclusions that will turn out to be dramatically wrong. The question is what is it gonna take for the equities markets to come to their senses and realize what the rest of us do here. I believe that will start to happen when the general press starts to pick up on these fundamentals. The STEO just came out on Friday so it will be interesting to see what kind of press that gets over the coming weeks. WRT the accuracy of EIA forecasts, it would be interesting to see what the STEO of Feb '01 looked like. Jan natgas prices averaged $9.17 and Feb prices averaged $5.81 that year, yet the average gas price for the year was only $4.10. See the Feb '01 STEO at eia.doe.gov Just found this when I was editing the post. Looks like they were too high in '01.