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Strategies & Market Trends : Natural Resource Stocks -- Ignore unavailable to you. Want to Upgrade?

To: snowdog who wrote (48048)	12/12/2006 1:02:59 PM
From: JimisJim	Read Replies (2) \| Respond to of 109015

snowdog, re: outlook for OSX sector... I'm still working on this myself as this month is the time of year that all the majors set their capex budgets based on their expectations re: oil prices for the next year... and their capex budgets also are a fairly reliable indicator of how OSX company stocks will perform... this is one reason I've always liked the OSX sector is that for LTH investors (like me) you have other highly paid people at the majors giving regular signals to us about what their research has told them to expect for 1-yr trends (noting that even if they think the price of oil will rise to $70 again, it will do so in a highly volatile way, i.e., like a saw tooth pattern up and down, but with the overall trend up). So far, we have only two majors actually reporting their capex with COP saying they are cutting (they say because they've finished paying for that 20% stake in Lukoil they bought), while CVX says they are increasing capex... Then an industry poll claims to have asked 300 energy companies what their capex plans are for 2007 and report that the data suggests a mild increase in capex sector wide of about 9%... this includes the OSX companies' estimates of their own capex, which typically doesn't increase that much unless their backlog is so large they must spend more on equipment to work off the backlog of orders. My preliminary read is that OSX will trend upward next year, but not as robustly as this year... even during the oil plunge in early fall, OSX companies had large backlogs to work off and apparently the majors are not cancelling orders... but there are literally hundreds of new and refub rigs coming to market now and next year, so dayrates for drillers probably will soften, but I don't see major drops... Also the major oils do not seem very interested in doing their own exploration -- XOM has almost completely stopped doing their own -- preferring instead to concentrate on maximum production/exploitation of known/proven reserves and/or M&A to regrow reserves... this is why we're seeing a huge explosion in the land drilling/wildcatting here -- rig prices are soft now and it is easy/cheap to drill prospects on land... For that reason, this fall/winter, I have been concentrating my OSX plays on offshore (and nat gas -- but more about gas in a min.) OK, gas... again, we have inconclusive data on the size/impact of this winter's mild el nino... I like CHK's and Roebear's forecasts because it would be very good for gassers, but I have read forecasts for this winter and for next year that are literally all over the map and personally do not have a firm idea of what to expect. Just in case, I'm either biased toward lightening my nat gas exposure, or standing pat... at least for the next week or so... the one thing a lot of people seem to agree on is that there will be a significant cold snap for the holidays, so there is probably a nice setup forming in gassers for a ST, maybe IT swing trade in gassers for the holidays. Jim