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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: RGinPG who wrote (11227)	2/10/1998 12:52:00 PM
From: The Perfect Hedge	Respond to of 95453

Also note the light volume that some of these stocks are advancing on.Something fishy here Pecan Grover. GD

To: RGinPG who wrote (11227)	2/10/1998 1:03:00 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 95453

Ron, Some big differences between now and the 80's. For one, with oil prices going to the moon, there was enormous building of rigs that ran into cutbacks in consumption. The result was reduced drilling and overcapacity of rigs, with many having to be stacked or scrapped. This time you have oil prices much lower, a generally growing global demand for oil, much less supply of rigs, particularly deep offshore rigs, and the capacity to add new rigs limited and balanced by the obsolescence of old rigs needing to be retired or overhauled. One other item, you have drilling company execs who went through the hell of the 80's and are very cautious about repeating it. Baird

To: RGinPG who wrote (11227)	2/10/1998 1:11:00 PM
From: Teddy	Respond to of 95453

i try not to break copywright laws, but this is so good i figured i'd risk a few years in prison: The Buysider: Time to Step Back into Energy By Tom Kerr Special to TheStreet.com 2/10/98 11:15 AM ET Editor's Note: Money manager Tom Kerr submitted a piece calling the top in the energy group in late September. Talk about Right! Now Kerr and his firm, Reed Conner & Birdwell, are shopping again, selectively. So this week, Kerr is subbing in for his RCB colleague Jeff Bronchick, who usually writes The Buysider. * * * * * This is probably one of the best stock lists I've seen in a long time: STOCK 3-MONTH PRICE CHANGE Nabors Ind. (NBR:AMEX) -45.0% Cliffs Drilling (CDG :NYSE) -44.2% Marine Drilling (MDCO:Nasdaq) -41.0% Tidewater (TDW :NYSE) -38.1% Ensco International (ESV:NYSE) -37.8% Rowan Cos. (RDC:NYSE) -37.0% Diamond Offshore (DO:NYSE) -30.3% Global Marine (GLM :NYSE) -29.4% Parker Drilling (PKD:NYSE) -24.7% Halliburton (HAL:NYSE) -24.2% R&B Falcon (FLC:NYSE) -19.0% That's because: 1) We don't own them and someone else does, which helps our relative performance and 2) I panned these stocks in TheStreet.com inches from the top a few months ago. Why didn't we get clobbered? We tend not to buy stocks that everyone else is buying, especially when they sell at historically high valuations. It's a classic money manager contention -- a value orientation versus momentum investing. Do I pay attention to fundamental values, or do I spend most of my time figuring out what everyone else is doing, or going to do, and jump in? Which brings us to the oil service sector, one of my main areas of focus as an analyst, since there seems to be a perception on Wall Street that the guy with the Texas accent gets picked to cover oil and energy service stocks. The sector has seen a wicked transformation over the last several years. The stocks have gone from "value stocks" to "momentum stocks" and now back to "value stocks." So the $64,000 question is: Have the stocks fallen enough and thereby ridden themselves of "silly money" to justify purchase, given the number of dark clouds on the horizon? And more importantly, which ones? The problem in general with energy and oil service stocks is that they are definitively stocks to "rent," not stocks to own. Prices go up, a drilling boom develops, supply increases, prices go down, drilling goes down and so on. Unless you think solar energy is a 1999 story or have a 40-year time horizon, it is foolish to stray from these basic facts. As far as stock-picking, you must also be wary of just how silly people will get on the upside and how depressed they will get on the downside, because "fair value" is an amorphous concept in commodity stock investing. So how do you know what's what and where we are in the cycle? There is an almost unlimited supply of research material on this industry that Wall Street, consulting groups and the financial press provide. And today, the opinions are almost exactly split 50/50 in opposite directions. These materials are rife with quotes like "profit opportunity also dictates the oil industry's mix of spending on redevelopment versus development versus exploration" or "generally oil service capacities are inclined to remain potentially supply-constrained in the intermediate future." What? As is often the case, some of the information is helpful, yet most is too complicated and is often unnecessary. Sometimes you can put everything aside and just listen to an few insiders talk. Several weeks ago at the North American Prospect Expo in Houston, over 600 oil exploration & production companies met to buy and sell potential exploration prospects located throughout the U.S. and Canada. That was a record attendance. Deals were being done, money was changing hands, capital was flowing -- along with the champagne and cigar smoke. These people were seriously looking to drill, somewhere and somehow. But what about oil prices? Things don't look so good -- high production levels, lower demand, refinery shutdowns, warmer weather, rising inventories, Asia, etc. -- but that isn't necessarily bad for drillers. Psychologically it may be a short-term problem for the stocks, but fundamentally these companies are looking at five- and 10-year plans, which are not on Wall Street's radar screen. Therefore, this is creating some attractive dips in some stocks like Camco (CAM:NYSE), Schlumberger (SLB:NYSE) and Baker Hughes (BHI:NYSE) for the more conservative investor and some of the well-known offshore drillers for the more speculative ones. As James Wicklund from Dain Rauscher points out, oil companies do not plan their capital budgets based on current oil prices, instead they're based on the known decline rate of the current production base, and the need to grow company value by increasing net production. So at this time we're reducing our positions in the integrated oils and the oil E&P companies, while looking to add small positions in Camco and Schlumberger for our core portfolios and some unique service companies like Mitcham Industries (MIND:Nasdaq) and Dawson Geophysical (DWSN:Nasdaq) for our small-cap portfolios. Bottom line: Oil companies have to keep drilling for now. What else are they gonna do?