I've been bogged down with another stock, so I haven't been reading the thread. But I just came across this, thought I'd post it in case it hasn't been posted already.
This news is getting my party engines revved up!
THE MOTLEY FOOL - Mar 23 2:04pm
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The Lunchtime News (Archive)
Mar 23, 1998
FOOL PLATE SPECIAL
An Investment Opinion by Dale Wettlaufer
Oil Producers Cut Back
Oil stocks were all the talk this weekend as founding Organization of Petroleum Exporting Countries
(OPEC) members Venezuela and Saudi Arabia, along with Mexico, announced pledges to cut their oil
production by 1.1 million barrels of oil per day by the beginning of April. The countries' oil ministers
called on other major producers to cut back on their production by an additional 900,000 barrels per
day. Other OPEC members chimed in with their responses, with other Persian Gulf nations pledging to
chip in more than a quarter of the targeted production cut. Over the last year, prices have come down
precipitously as producers could not resist the temptation to cash in on higher per-barrel oil prices as
measured in dollars. The double-whammy effect of the dollar appreciating against other major world
currencies increased the purchasing power of those petro-dollars, too, further increasing the temptation
to increase output. For countries with imploding currencies and capital outflows, such as Indonesia,
increasing oil production had been a no-brainer.
The production agreement lit a fire under oil prices, with May 1998 light crude oil rising more than
14.5%, to $16.75 per barrel in NYMEX trading. The agreement and the goose to oil prices is now
working its way through capital markets around the globe. While bonds remained largely ambivalent to
the action, stocks of companies where energy prices are a key moving part in their cash flow certainly
were not as ambivalent. Airlines took the news as a downer, though most are hedged to the extent that
$13 per barrel oil was not going to drop straight to their bottom line. UAL Corp. (NYSE:UAL - news)
, parent of United Airlines, lost $1 7/8 to $88, Southwest Airlines (NYSE:LUV - news) shed $2 1/2
to $27 5/8, US Airways Group (NYSE:U - news) fell $2 3/4 to $70 11/16, and American Airlines
parent AMR Corp. (NYSE:AMR - news) dipped $3 1/16 to $136 3/4.
On the upside, integrated oil companies surged. Mobil Corp. (NYSE:MOB - news) jumped $2 7/8 to
$81 7/16, Exxon Corp. (NYSE:XON - news) added $2 1/8 to $69 1/4, Atlantic Richfied
(NYSE:ARC - news) gained $2 13/16 to $83 3/16, Texaco (NYSE:TX - news) drove $2 1/8 higher to
$63 7/16, Amoco (NYSE:AN - news) bounced $2 1/4 to $88 7/8, Royal Dutch Petroleum
(NYSE:RD - news) added $1 9/16 to $58 9/16, and Amerada Corp. (NYSE:AHC - news) rose $1
1/8 to $60 5/8. Oil production & exploration companies and marketers also gained, with Penzoil
(NYSE:PZL - news) up $1 7/8 to $67 5/16, Benton Oil & Gas (NYSE:BNO - news) up $3/4 to $12
11/16, Enron Oil & Gas Co. (NYSE:EOG - news) $1 7/16 higher at $23 3/4, and Talisman Energy
(NYSE:TLM - news) up $ 1 11/16 to $31 5/16.
Rounding out the stocks moving today, oil drillers and energy services companies gained ground on
what could be more a psychological turning point for investors than an economic turning point for the
industry. Diamond Offshore (NYSE:DO - news) ascended $2 5/16 to $49 3/8, R&B Falcon
(NYSE:FLC - news) gained $2 5/16 to $32 1/8, Global Marine (NYSE:GLM - news) added $1 5/8 to
$26 1/8, Marine Drilling Co. (Nasdaq:MDCO - news) gushed $1 15/16 to $23 1/4, Ensco
International (NYSE:ESV - news) rose $2 1/2 to $30 1/2, Halliburton (NYSE:HAL - news) surged
$3 7/8 to $52, and Schlumberger (NYSE:SLB - news) looked magnifique, gaining $4 5/16 to $77 7/8.
Equipment and services company EVI Inc. (NYSE:EVI - news) tacked on $3 7/8 to $46 7/8, and
Smith International (NYSE:SII - news) rose $5 1/4 to $58 7/8.
UPS
Plastic container maker Ultra Pac Inc. (Nasdaq:UPAC - news) picked up $8 3/16 to $14 7/8 after
agreeing to merge with specialty packaging products maker Ivex Packaging Corp. (NYSE:IXX -
news) . Under the deal, Ivex will launch a cash tender offer for all of the outstanding shares of Ultra
Pac at $15.50 per share.
Appliance manufacturer Maytag Corp. (NYSE:MYG - news) gained $1 1/16 to $48 13/16 after
saying its fiscal Q1 EPS will be "much better" than the $0.61 expected by analysts surveyed by First
Call. Sales are expected to rise by as much as 25% from their year-ago levels due to strong demand
for new products introduced last year and improved operating margins.
Great Lakes Chemical Corp. (NYSE:GLK - news) traded $2 11/16 higher to $52 3/8 after Morgan
Stanley raised its rating on the company to "strong buy" from "outperform." The specialty chemical
company also named Mark Bulriss as its new president and CEO following the retirement of Robert
McDonald.
Home healthcare provider American HomePatient (Nasdaq:AHOM - news) added $1 1/8 to $20 1/2
on reporting Q4 EPS of $0.31 versus $0.30 a year ago, which was below the Street estimate of $0.37.
Revenues were up 33% in the quarter to $105.3 million, while cash flow (earnings before interest,
taxes, depreciation, and amortization) rose 34% to $21.9 million.
Fort Bend Holding Corp. (Nasdaq:FBHC - news) , the holding company for Rosenberg,
Texas-based Fort Bend Savings and Loan Association, jumped $7 3/4 to $28 1/2 after receiving an
unsolicited buyout offer of $28 to $32 per share in cash from Millers Mutual Fire Insurance Co. The
bid represents a 35% to 54% premium to the company's closing price of $20 3/4 on Friday.
Auto parts distributor and advanced engineering products developer Consulier Engineering
(Nasdaq:CSLR - news) added $2 1/2 to $6 3/4 after announcing a two-for-one stock split effective
April 15.
Telemarketing services company Telespectrum Worldwide (Nasdaq:TLSP - news) rang up a $1 7/8
gain to $6 5/8 after naming Keith Alessi its new president and CEO. Alessi is the former CEO of tax
preparer Jackson Hewlett, which was acquired by consumer services giant Cendant Corp.
(NYSE:CD - news) in January.
Administrative outsourcing firm ProBusiness Services (Nasdaq:PRBZ - news) advanced $2 3/8 to
$29 1/8 after soft drink maker Coca-Cola (NYSE:KO - news) selected the company to provide
payroll tax services.
DOWNS
Boeing (NYSE:BA - news) fell $1 3/4 to $51 11/16 after The Wall Street Journal reported that new
bottlenecks are hampering deliveries of more than 50 of the Seattle-based plane maker's latest 737
models, just weeks before their production is slated to double. The latest problems are due to chronic
parts shortages and unexpected modifications demanded by European and U.S. safety regulators.
Troubles last year in meeting a big jump in orders forced the world's leading maker of commercial jet
aircraft to close some assembly lines temporarily and report its first annual loss in 50 years. |
