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Gold/Mining/Energy : NE, Noble Drilling -- Ignore unavailable to you. Want to Upgrade?

To: Joe Btfsplk who wrote (131)	11/20/1997 10:54:00 PM
From: Joe Btfsplk	Read Replies (4) \| Respond to of 301

Barron's Weekday Extra has another rather negative artice on the sector in general. Some snips from "Oil Service May Fall Further As Insiders Dump Shares" "Last week's sell-off in oil-service stocks may well continue in the months ahead. Though most people think the economic outlook for the group is favorable, such optimism is more than reflected in the current prices of oil-service stocks. That may explain why corporate insiders.... have been selling the shares heavily since summer. Last week's selling followed a big run in the stocks. But euphoria is fading fast. "I fully expect we are going to get a pretty severe correction in the group over the next three to six months, perhaps 20% to 25%," says a former Wall Street energy service analyst who now co-manages Loomis, Sayles Core Value Fund. Carroll remains bullish on the industry's long-term outlook, but for some time he has been worried about the stocks' high valuations and the momentum investors who he says fueled...... He recently lightened up on .........and Noble Drilling. Selling by oil service insiders intensified even as the shares made new highs and as Wall Street bulls continued to flog the stocks. Bob Gabele, who tracks buying and selling by insiders, says that lately there has been a "marked" difference in insider behavior between the oil service sector and the major exploration & production companies like Mobil and Exxon. This may indicate that the future business expectations of the insiders "might not be as strong as those [who were] bidding the stock prices up". Of course, no one's looking for a bust any time soon. Oil service companies' earnings are expected to grow by at least 20% over the next year or two. Simmons & Co., which underwrites oil service offerings, remains -- not surprisingly -- very bullish on the group. "Our belief is that we are three years into a decade-long [up] cycle," says Dan Pickering, a Simmons vice president. "You're looking at four to five more years of above-average performance". But with rig utilization rates around 95%, the industry is running nearly at full steam, and there's little opportunity for incremental revenue from new rigs. The upshot: Expected higher day rates next year are unlikely to compensate for lower revenue growth from new rigs -- the very factor that powered the recent earnings increases in the group. Even Simmons & Co. warned recently that "until the rig supply/demand imbalance is corrected, project delays, cost overruns and postponement or cancellation of oil and gas development projects will become increasingly common." Indeed, Gabele says, the oil service insiders' sales may reflect their skepticism about "the tight supply/high demand thesis as they continue to doggedly take profits." And some analysts speculate that less tigerly growth from Southeast Asia -- and now also Latin America -- will also slow the growth in global demand for oil, perhaps putting a near-term ceiling on oil prices (which are already down by about $5 a barrel from last year's prices to about $20). Morgan Stanley, for example, recently trimmed its 1998 demand expectation of 76 million barrels a day by 250,000 barrels a day because of the turmoil in Southeast Asia. Smith Barney sees growth in oil demand largely flat next year at a modest 2% to 3%. And should U.S. economic growth slow down along with Asia and Latin America, all bets are off.