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

To: Tomas who wrote (31829)	5/2/2004 8:34:28 PM
From: Tomas	Respond to of 206321

You've never had it so good ... really Upstream, April 30-May 06 issue By Terry Macalister ANYONE who has only been in the oil and gas industry for 20 years will be forgiven for thinking life has never been as good as this. A sustained burst of high crude and natural gas prices has sent profits soaring and stock market values up quite dramatically. Delegates turning at to the Offshore Technology Conference and exhibition in Houston over the coming days will have a spring in their step. It's no surprise that the organisers are predicting the biggest show in decades. Bankers, lawyers and sundry kinds of service industry are all desperate to be best friends with an energy sector currently awash with money. But ironically this is only part of the picture because at this moment of glory the oil sector is also facing a fight for credibility. It managed to side-step the Enron fiasco, but there is no escaping the fall-out from the Shell scandal. This has been a disaster for the Anglo-Dutch supermajor but it has also harmed the rest of the industry with the question being put that if a company like Shell can falsify its reserve figures, then anyone can. We have got used to oil companies being accused of human rights abuses, state companies operating political slush funds and Russian magnates being gaoled amid fraud allegations. But for Shell's former chairman Philip Watts to be facing potential criminal charges in the US what has the world come to? Trust and confidence in the wider industry has been tarnished, make no mistake about that. This week, BP chief executive John Browne had no appetite whatsoever for criticising Shell either directly or indirectly as he presented the company's sparkling first-quarter financial results. Indeed, Shell might be a rival of BP, but it is also one of the company's major partners, as is ExxonMobil. It will take time for trust in reserves numbers to be re-established, and progress could depend on talks between the regulators and industry over how they are to be counted. The Securities & Exchange Commission (SEC) has shown by its recent decision not to insist on flow tests in the Gulf of Mexico that it is willing to become more flexible. But it is surely anomalous for one geographical area to be subject to one set of conditions from the SEC and the rest different criteria. Oil companies are already having to report different reserves figures to the London Stock Exchange than they do in New York. International guidelines are desperately needed. All of this is a distraction for an industry that might have plenty of cash in its pocket but is still having to work very hard indeed to replace reserves. That desperation underlies the difficulties at Shell and is the biggest challenge for ExxonMobil, BP and Total. Service companies such as Saipem and Technip have seen their share prices swiftly move ahead in 2004 in anticipation of oil companies increasing their capital spend. And the rig count is considerably higher than it was 12 months ago. But the reality is that neither the oil giants nor the independent exploration and production outfits are convinced that the Brent oil price can possibly remain above the $30 mark for very much longer. They are cautious therefore about opening up the spending tap, as evidenced by BP committing itself to a huge share buyback programme rather than investing the cash back into the ground. But massive projects are being brought forward in the US Gulf, off Angola and in the Caspian, while exciting new areas are being opened up off West Africa and in northern India. Fantastic strikes by smaller players, such as Cairn Energy in Rajasthan, have brought the raw excitement of exploration back into the stock market. The sudden increase in the value of oil companies has also stunted the merger and acquisition activity. Many aggressive companies might be laden with cash but they are finding it hard to find undervalued targets. Moves by Kerr-McGee and EnCana to increase their exposure to natural gas in North America through acquisition has only been met by howls of criticism from analysts who say they are overpaying. Companies are sitting on cash. They are frightened of making a wrong move but eventually they will turn back to the drillbit. Those who do remember the oil price boom of the early 1980s will remember it led to the big players doing some pretty strange things, such as investing in coal and even car plants. Lessons appear to have been learned. Amid the anguish over the reserves issue, the oil men and women at OTC should reflect they have much to be proud of.