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Gold/Mining/Energy : KERM'S KORNER -- Ignore unavailable to you. Want to Upgrade?

To: Kerm Yerman who wrote (11571)	7/2/1998 3:30:00 PM
From: Kerm Yerman	Respond to of 15196

MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WED., JULY 01, 1998 (4) TOP STORIES Trade Battle Brewing Over Canadian Sulphur The Financial Post The U.S.'s last sulphur mining company is blaming the shutdown of one of its two mines on Canada's oil and natural gas industry, which it accuses of dumping in the U.S. Freeport-McMoRan Sulphur Inc. said it was forced to close its 30-year-old mine in Culberson County, Tex., and has asked the U.S. government to hit Canadian energy companies with anti-dumping duties. "Sulphur prices have been driven down to a level at which it is no longer economically feasible to operate the mine," said Freeport president Robert Wohleber. Freeport-McMoRan Sulphur is part of Freeport-McMoRan Inc., former owner of a nickel operation in Cuba, where Sherritt International Corp. is now mining. Sherritt executives were barred from entering the U.S. because, under the U.S. Helms-Burton law, it is illegally operating on property confiscated from Freeport-McMoRan. The New Orleans-based company and chairman Jim Bob Moffett drew a lot of attention in Canada last year when they exposed the Bre-X Minerals Ltd. debacle. The Indonesian government picked Freeport-McMoRan to be Bre-X's partner, but the company found no gold at the Busang site. Freeport-McMoRan and the U.S. sulphur industry have been complaining about Canadian sulphur imports since 1973. Between 1991 and 1995, the U.S. International Trade Council imposed duties of up to 40.8% on such companies as Mobil Oil Canada Ltd. Gas producers Shell Canada Ltd. and Amoco Canada Petroleum Ltd. are the top two sources in Alberta of the byproduct of oil and gas refining. Amoco produces about 600,000 tonnes a year but has not faced anti-dumping duties in years, a spokesman said. Still, the U.S. industry is convinced Canadian sulphur is being dumped on the market, said Joyce Ober, a sulphur specialist with the U.S. Geological Survey. "There's a constant investigation into whether Canada is dumping sulphur in the U.S.," she said. Ken Ellzey, vice-president of marketing for Freeport-McMoRan Sulphur, said the company expects duties will be imposed on Canadian sulphur for 1996 and 1997. It has also asked for an investigation for this year. The problem may be even more serious than the U.S. government believes, Ober added. The current ITC investigation is based on estimates that about one million tonnes of sulphur was imported from Canada last year, she said. But the Alberta oil and gas industry exported at least 1.5 million tonnes last year alone. The oil industry is the major source of Canadian sulphur. "ITC is missing a lot of data so it's going to be very hard to make a determination." Industry sources said yesterday that Freeport-McMoRan may be looking for a foreign scapegoat to blame for its mine closing. More sulphur is being produced at U.S. oil refineries than in previous years because of tougher environmental laws. As well, Freeport-McMoRan's Texas mine is far from the nearest port, boosting transportation costs. The company said it will continue to mine sulphur at its Gulf of Mexico mine off the Louisiana coast. It will also buy sulphur elsewhere to meet its commitments while the Culberson mine is shut over the next three months. The U.S. produces only about 2.7 million tonnes of sulphur a year, with Freeport-McMoRan contributing up to 900,000 tonnes at a price of about US$60 a tonne. U.S. demand is hovering at about seven million tonnes. Much of that is converted into phosphate-based fertilizer in Florida and North Carolina. Besides Canada, Venezuela and Mexico are major exporters of sulphur to the U.S. There is enough sulphur in the world to meet demand for the next 400 years. DCR Comments on Devon Energy's Merger Agreement CHICAGO, July 1 /PRNewswire/ -- Duff & Phelps Credit Rating Co. (DCR) views Devon Energy's planned acquisition of Northstar Energy Corp. as a positive from both an operational and credit perspective. DCR rates Devon's implied senior debt 'BBB-' (Triple-B-Minus) and its preferred stock 'BB' (Double-B). Under the agreement, Devon will acquire Northstar, based in Calgary, Alberta, for about $565 million in stock and will also assume about $312 million in debt from Northstar. Devon will issue 0.227 share for each of Northstar's 68 million shares outstanding. The transaction also has a provision that allows Devon to pay as much as 0.235 share for each Northstar share if Devon's stock price falls below $32.95. The transaction will be accounted for as pooling of interests. The acquisition provides Devon with additional proven reserves of 550 billion cubic feet of natural gas and 36 million barrels of oil and NGLs, all in Canada. In addition, Devon will get 1.6 million acres of undeveloped leases in Canada. The purchase nearly doubles Devon's natural gas assets and leaves the company with 1.2 trillion cubic feet of gas and 117 million barrels of oil after the acquisition. The planned acquisition is also positive from an operational viewpoint as Northstar's operations appear to complement Devon's existing Canadian operations. Devon will merge its existing operations in Canada into Northstar's operations, and Northstar's current management will operate the merged Canadian operations. After the acquisition is complete, Devon's assets will be split evenly between the United States and Canada. DCR plans to meet with Devon's management in order to complete a thorough review of the transaction and to evaluate the company's financial objectives. The priorities for the use of cash and management's acquisition strategy will need to be analyzed in order to assess its impact from a debt service perspective. Iran Seeks Western Investment In Oil Sector Associated Press Iran is trying to revitalize its oil industry by seeking investors from a source that once would have been unthinkable -- the West. The Iranians, who don't plan to privatize state-owned oil fields, are courting outside investment at a conference this week in London. The nation is offering outsiders a chance to invest in more than two dozen production projects worth about $7 billion, said Farah Rahimi, Iran's minister of international affairs, said Wednesday. The projects involve both exploration of new fields and finding ways to pump more oil from existing fields, Rahimi said. The first deal will be put up for grabs on Aug. 3 in Tehran, he said. The U.S. government bars American companies from investing in Iran's oil sector. It has threatened sanctions against international companies doing business with Iran, but has recently softened its position toward the longtime foe. One British oil executive said Wednesday that U.S. sanctions would be unsustainable. "We are a U.K. company and we do not accept that a foreign government can tell us what to do," said Tim Eggar, a former British energy minister who now is chief executive of Monument Oil and Gas PLC. U.S. Oilmen Look But Can't Touch As Iran Opens Up American oilmen barred from investing in Iran watched ruefully from the sidelines on Wednesday as the Islamic republic offered a tempting selection of oil and gas projects to foreign investors. Executives from a dozen U.S. majors and independents flocked to the London gathering to rub shoulders with European and Asian competitors and 50 Iranian officials at the launch of more than $5 billion in project tenders. But the oilmen could only press their noses against the shop window as Iran paraded its wares to an excited audience of oil, gas and energy service companies. Bilateral sanctions imposed in 1995 bar U.S. companies from trading or investing in Iran, owner of the world's second largest gas reserves and fifth largest oil reserves. Washington accuses Iran of supporting what it calls terrorism and hindering Middle East peace-making. Iran denies the charges. Despite the curbs, Americans from companies such as Exxon Corp, Texaco Inc, Chevron Corp, Phillips Petroleum Co, Amoco Corp and Unocal Corp were listed as delegates and many attended to learn about the opportunities and meet Iranian counterparts seldom seen in the West. "We're here because it's going to open up eventually and we have to be prepared -- but you'd better not quote me by name," said one middle-ranking executive. "It's sure frustrating, though," he added. "All around we see the Europeans stepping forward to pick the low-lying fruit." Most U.S. executives said that while it might be seen as politically sensitive back home to attend Iranian conferences, such contacts had to be made to lay the ground for possible eventual entry into a major energy market. And most said they believed the curbs would one day come down. They pointed to an easing earlier this year of U.S. curbs on companies from third countries making big investments in Iranian energy and a recent, tentative warming of long frigid diplomatic relations between Tehran and Washington. "We totally understand the position of the U.S. government and as good citizens we try to work within that framework," said M.A. Abdel-Rahman, regional director for the Middle East, Eurasia and North Africa for Pennzoil Exploration and Production Company. "But that would not stop us from participating and building up a knowledge base to prepare for competition that could arise in the future." Iran says the projects are being presented to the Americans on equal terms as to other foreign investors, adding the only losers are U.S. energy companies who must forgo potential business and the attendant earnings and employment opportunities. But Iran watchers also say Tehran has much to gain from heightened international interest in its strategic energy sector. "This seminar has attracted a fantastic seminar. I've never seen so many Americans at an Iranian oil seminar," said Iranian oil consultant Farhad Tehrani. "Iran needs a lot of oil revenue because that is the only way to promote political stability and improvements in the economy. U.S. Draws Exploration Dollars For High-Cost Oil Oil and gas firms are spending a growing share of the money they set aside to acquire new reserves in the U.S., even though it is cheaper to find reserves elsewhere, according to a report published on Wednesday. Global upstream capital spending by the 131 publicly traded oil and gas companies covered by the report rose 30 percent to a record $91.6 billion in 1997, with the slice spent in the U.S. rising 42 percent to $37.1 billion. However, with oil prices subdued this year, the Global Upstream Performance Trends report from Arthur Andersen and John S. Herold Inc, warns that capital spending this year may show the first year-on-year decline since 1992. ''Contrary to popular belief, the U.S. has been the industry's region of choice and has seen its proportional share of capital spending increase over the past five years,'' Arthur Andersen's Victor Burk said at a press presentation of the report. In 1997 upstream capital spending in the United States by large independent companies came to $16.6 billion, exceeding the equivalent figure for major oil firms of $15.8 billion for the first time. Small independents spent $4.7 billion. Capital spending, as defined in the report, comprises both exploration and development -- reserves acquired ''through the drillbit'' -- and the purchase of proven reserves. Brian Lidsky of John S. Herold said the United States' rising share of total capital spending over the last five years was particularly impressive goven the common perception that other regions of the world offered better opportunities. ''The increased level of domestic spending suggests that the stability, infrastructure and market size in the U.S. remain highly attractive to the world's oil companies,'' he said. The big jump in 1997 was partly due to rising investment in the deep waters of the U.S. Gulf of Mexico, he said. Herold expects production from the deepwater Gulf to grow by at least 25 percent per year over the next five years. The report said average reserve replacement costs -- the costs of acquiring new reserves by any means -- rose 16 percent to $6.10 per barrel of oil equivalent (BOE) in the U.S. in 1997 while the average cost outside the U.S. fell slightly to $3.77. Among major oil companies Exxon Corp(XON) had the lowest average three-year reserve replacement cost in the U.S. while Amoco Corp(AN) had the lowest average cost outside the U.S. The report said average finding and development costs rose 16 percent to $6.83 per BOE in the U.S. and rose three percent to $4.12 in the rest of the world. Among the majors Exxon had the lowest average finding and development cost in the United States while Royal Dutch/Shell

To: Kerm Yerman who wrote (11571)	7/2/1998 3:41:00 PM
From: Kerm Yerman	Read Replies (10) \| Respond to of 15196

MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING WED., JULY 01, 1998 (5) TOP STORIES, Con't Global Oil & Gas Capital Spending Surges & Reserves Increase, But U.S. Finding & Development Costs Continue Rising in 1997 U.S. Share of Worldwide Capital Spending Reaches a High of 40%; Large Independents Outspend Majors in the U.S. for First Time: Arthur Andersen/John S. Herold Analysis Global capital expenditures by the largest companies in the upstream oil and gas industry surged 30% to more than $91 billion during 1997, with 40% of the spending on projects in the U.S. -- the highest proportion in at least five years -- according to Global Upstream Performance Trends-Advance Edition, a joint study by Arthur Andersen and John S. Herold. The benchmark study reviewed U.S. and international results for 131 publicly traded companies each with proved oil and natural gas reserves in excess of 20 million equivalent barrels of oil (BOE) as of the most recent fiscal year. The survey companies are classified into three groups: majors (integrated oil companies with reserves over 1 billion BOE), large independents (100 million to 1 billion BOE) and medium independents (20 million to 100 million BOE). These companies account for 56% of U.S. crude oil and 62% of U.S. natural gas production, and for 67% of U.S. oil and 64% of U.S. natural gas reserves. In 1997, U.S. E&D spending rose 38% to $28.8 billion while international E&D spending by the survey companies increased 20% to $45.8 billion. In addition, proved property acquisitions jumped 59% in the U.S. to $8.3 billion and 40% outside the U.S. to $8.7 billion, including a 150% rise to $4.0 billion in Canada and a 200% jump to $1.5 billion in Latin America. For the first time, large independent companies spent more than the major oil companies on total U.S. capital expenditures in 1997, topping the majors' total by almost 5%, $16.6 to $15.8 billion. This was primarily due to an increase of $2.8 billion in the large independents' proved property acquisitions to $5.7 billion, compared to a rise of $860 million in the majors' proved property acquisitions to $1.4 billion. The large independents also increased their U.S. exploration spending 54% to $2.7 billion, their development spending 30% to $6.5 billion, and their domestic unproved property acquisitions by 66% to $1.7 billion. Outside the U.S., the large independents' capital spending grew 67% to $16.4 billion while the major's international capital expenditures rose 9% to $36.8 billion. ''1997 was the record breaking year in the 1990s for the E&P industry in terms of capital spending,'' said Victor A. Burk, Arthur Andersen's managing director of energy industry services, ''but what a difference a year makes. After five consecutive years of capital spending increases, now it's back to the future. ''Oil prices have plummeted, natural gas prices have weakened, and 1998 could see the first decline in capital spending since 1992. Companies are responding in different ways. Some have already announced reductions in capital spending, a few have announced increases, but most are still holding the line and taking either a long term view or a wait and see attitude,'' Burk added. From 1993 through 1997, the survey companies increased capital spending more than two-thirds by plowing-back 68%, or $329 billion, of their total netbacks (revenue less production costs) in capital expenditures. In the U.S., survey companies plowed-back 75% ($121 billion) of total netbacks during that period but managed to boost production and reserves by just 9% and 7% respectively. By comparison, in the Africa/Middle East region, the companies plowed-back 50% ($16 billion) of total netbacks and achieved reserve and production increases of 22% and 34% respectively. In Europe, primarily the North Sea, plowbacks of 51% ($69 billion) produced a 22% increase in production but a 2% decline in reserves. Notably, the reinvestment rate reached by the survey companies' Canadian operations for the five-year period was a high 126% of netbacks, producing growth of 37% and 35% in production and reserves. ''The industry's 1997 U.S. spending increase is particularly impressive given the common perception that the international arena offers better opportunities,'' said Brian J. Lidsky, executive vice president of John S. Herold, Inc. ''While the U.S. lags most regions of the world in finding and development and reserve replacement cost performance measures, the increased level of domestic spending suggests that the stability, infrastructure and market size in the U.S. remain highly attractive to the world's oil companies. Additionally, the ramp-up in 1997 spending is partially attributable to increasing investments made in the deepwater Gulf of Mexico, which is shaping up to be one of the world's highest-potential oil and gas basins. Herold expects this higher level of spending in the Gulf to bear fruit in the form of at least 25% average annual gains in production from the deepwater Gulf of Mexico over the next five years,'' Lidsky noted. Capital Spending A nearly 60% increase to $8.3 billion in proved reserve acquisitions led 1997's 42% rise in U.S. capital spending to $37.1 billion. Pioneer Natural Resources was the largest acquirer of proved reserves in 1997 at $2.6 billion, followed by Texaco ($1.1 billion) and Lomak Petroleum ($448.8 million). Costs of proved reserve acquisitions rose 21% to $4.45 per barrel of oil equivalent (BOE), but remained 35% below the $6.83/BOE average cost of adding reserves through the drillbit in the U.S. U.S. exploration spending, including unproved property acquisitions, rose 48% to $11.5 billion in 1997 and development costs -- 47% of all U.S. capital spending -- increased 32% to $17.3 billion, partially reflecting higher drilling and completion costs. While all the independents in the survey group increased their combined U.S. exploration spending 53% to $3.9 billion, the majors increased their U.S. exploration expenditures just 6% to $3.2 billion, but significantly accelerated both their unproved (up 210% to $2.1 billion) and proved (up 149% to $1.4 billion) property acquisition spending in 1997. Internationally, proved reserve acquisition spending increased 40% to $8.7 billion in 1997, although per unit costs declined about 10% to $2.61/BOE. The large independents' increased their international proved property acquisition spending by 135% to $5.2 billion, while the majors' activity level fell 12% to $3.3 billion. Top international acquirers in 1997 included Canadian Occidental Petroleum ($1.3 billion), Amoco ($872 million) and Pioneer Natural Resources ($718 million). Since 1993, proved property acquisitions almost tripled internationally as companies scrambled to get quick entry into non-U.S. markets. International exploration spending rose 19% to $14.5 billion in 1997, while development expenditures -- 57% of all costs incurred -- increased 20% to $31.3 billion. Reserves U.S. oil reserves of the survey companies increased by one billion barrels, or 5%, to 20.0 billion barrels in 1997. Drillbit additions rose 38% to 2.0 billion barrels, and one billion barrels were added through acquisitions, 71% more than in the prior year. The largest U.S. oil reserve holder continued to be British Petroleum, with 2.8 billion barrels. Production remained steady at 1.8 billion barrels for the fifth consecutive year. International oil reserves climbed 4.1 billion barrels, or 10%, to 45.7 billion barrels, the largest annual increase in the five year survey period. Drillbit additions rose 17% to 4.3 billion barrels, and purchases increased 41% to 1.9 billion barrels. The largest reserve increases occurred in Canada (up 18% to over 5 billion barrels), Latin America (up 10% to 2.4 billion barrels) and the Africa/Middle East region (up 8% to 5.5 billion barrels). International oil production increased 4% to 4.1 billion barrels. U.S. natural gas reserves increased less than 1% to 106.7 trillion cubic feet (Tcf) in 1997, primarily because of huge net downward reserve revisions of 1.0 Tcf, most prominently EEX's 623 billion cubic feet (Bcf) revision of its East Texas properties. Drillbit additions increased 25%, or 2.5 Tcf, to 12.3 Tcf, led by Burlington Resources (1.0 Tcf) and Texaco (927 Bcf). Proved gas reserve purchases rose for the third consecutive year by 4% to 5.2 Tcf, but were largely counterbalanced by 3.9 Tcf in reserve sales. Pioneer Natural Resources accounted for 1.1 Tcf of the gas reserve purchases, and Amoco led the sellers by pruning 1.2 Tcf of U.S. reserves. Production continued its long-term upward trend, rising 2% to 11.6 Tcf -- one-half the 4% average annual growth rate from 1993 through 1996. International gas reserves increased almost 5% to 221.3 Tcf, including an 80% rise in purchases of proved reserves to 8.5 Tcf -- led by Amoco's purchases of more than 2.4 Tcf of gas -- partially offset by a 122% increase to 4.2 Tcf in sales of gas reserves. Drillbit activity added 17.0 Tcf to international gas reserves, a 7% increase. Revenues & Operating Results Revenues from U.S. producing activities increased slightly to $54.7 billion in 1997, but results of operations declined to $13.0 billion, 11% below the 1996 results but still more than double the average in the 1993- 1995 period. Production costs were flat at $14.7 billion, but the big expense increase occurred in depletion, depreciation & amortization (DD&A) expenses, which rose 18% to $16.7 billion, primarily due to asset impairment writedowns. International revenues and results of operations each declined approximately 3% in 1997, to $104.1 billion and $21.8 billion respectively. Netbacks -- operating revenues minus production costs, including production taxes -- were marginally higher in the U.S. at $40.0 billion, but fell $0.12 on a per barrel equivalent basis to $10.74/BOE. Internationally, netbacks declined 4% to $76.5 billion, with the per barrel equivalent sliding $0.82/BOE to $12.01/BOE. Performance Measures Global Upstream Performance Trends uses five measures of upstream performance: -- Reserve Replacement Costs (RRC) - The implied cost of proved reserves added through all means, including extensions and discoveries, revisions, improved recovery and purchases of proved reserves. U.S. reserve replacement costs rose a significant 16% to $6.10/BOE, the second consecutive annual increase and primarily the result of higher costs for leases, drilling rigs and oilfield services, equipment and supplies. When evaluating corporate performance, we use the three-year trend in order to eliminate many of the timing differences between when costs are incurred and when reserves are added. Exxon led the majors in three-year (1995-1997) average replacement costs at $2.68/BOE, Union Texas Petroleum was first among large independents at $1.44/BOE, and Evergreen Resources was the top-performing medium independent at $1.48/BOE. International RRCs declined slightly ($0.04/BOE) to $3.77/BOE led by a 10% decrease in Canadian RRCs to $4.36/BOE. Amoco led the majors with a $2.47/BOE three-year average RRC, with spending mainly occurring in Latin America. Nuevo Energy was the top-performing large independent at $1.42/BOE, and Tesoro Petroleum was the lowest-cost medium independent at $0.80/BOE. -- Finding & Development Costs (FDC) - The implied cost of reserves added through the drillbit, including extensions and discoveries, revisions and improved recovery, but excluding proved reserve purchases. U.S. finding and development costs rose 16% to $6.83/BOE, while international FDCs increased 3% to $4.12/BOE. Canadian FDCs improved by 26% to $4.41/BOE and Asia/Pacific region FDCs declined 23% to $3.13/BOE, while European FDCs climbed 35% to $7.41/BOE. As in RRC results, Exxon was the three-year FDC leader in the U.S. among majors at $2.69/BOE, and Union Texas was number-one among large independents at $1.44/BOE, with Evergreen Resources the top FDC performer among medium independents at $1.56/BOE. Outside the U.S., Royal Dutch/Shell led the majors with FDCs of $2.34/BOE, and Noble Affiliates paced the large independents at $1.38/BOE. -- Proved Reserve Acquisition Costs - The reported cost paid to acquire proved reserves. The cost of acquiring proved reserves in the U.S. jumped 21% in 1997 to $4.45/BOE on $8.3 billion of transactions. Pioneer Natural Resources accounted for 32% of U.S. acquisition spending, and Texaco 13%. U.S. low-cost acquirers in 1997 were Plains Resources ($28.2 million at $0.65/BOE), Coastal Corp. (NYSE:CGP; $48 million at $1.08/BOE), and Howell Corp. (NYSE:HWL; $82.7 million at $2.12/BOE). International acquisition costs declined almost 10% to $2.61/BOE on $8.7 billion in volume; however, excluding Mobil's $1.5 billion 1996 acquisition of Ampolex Ltd. in the Asia/Pacific region, per unit international acquisition costs actually increased 14%. Canada accounted for 46% of international acquisition activity and costs increased 35% to $4.25/BOE -- on par with U.S. costs. Latin America acquisitions surged 200% to $1.5 billion with unit costs increasing 51% to $3.45/BOE. -- Production Costs - Actual reported production costs. Production costs remained under control throughout the world during 1997, largely due to stringent cost control measures and a rising production profile. U.S. production costs decreased to $3.96/BOE, off $0.07/BOE from 1996 and a $0.48/BOE reduction since 1993. International production costs declined 1% to $4.34/BOE, an overall decline of $0.39 since 1993. -- Production Replacement Rates - All sources production replacement rates are calculated as net reserves added through extensions and discoveries, revisions, improved recovery and purchases and sales of reserves, divided by production for the period. Finding and development (F&D) production replacement rates exclude the effect of purchases and sales of reserves. The U.S. all sources production replacement rate for oil and natural gas liquids rebounded strongly to 156% of production in 1997 from just 67% of production in 1993. International all sources oil production replacement continued at the high rate of 199% compared with 142% in 1993. The turnaround in oil production was not due solely to acquisitions. U.S. drillbit additions climbed to 135% of production, up from 66% in 1993. Internationally, the survey companies replaced 173% of oil production on an F&D basis, compared with 98% in 1993. The U.S. all sources natural gas production replacement rate of 106% continued a downward trend from the five-year high of 136% in 1995. Downward gas reserve revisions of more that 100 Bcf each by EEX, Amoco, Unocal, Mobil, TransTexas and Pioneer Natural Resources were largely responsible for the decline. International all sources gas production replacement rose 8% to 208%. From the drillbit only, U.S. gas reserve additions net of revisions did not even meet production, resulting in a production replacement rate of 94%. However, this is up 5% from the 1996 level of 89%. Internationally, the F&D gas production replacement rate was 175%, having climbed steadily since 1993. Arthur Andersen is a global multidisciplinary professional services firm that helps its clients improve their business performance through assurance & business advisory services, business consulting, economic and financial consulting, and tax & business advisory services. With more than $5 billion in revenues and more than 60,000 employees, Arthur Andersen serves clients in more than 363 locations in 78 countries. Founded in 1948, John S. Herold, Inc. is a specialized information services company. As ''the petroleum company research company,'' Herold focuses on valuation and performance measurement of the world's leading oil and gas companies. Herold closely monitors the world's energy capital markets and the dynamic merger, acquisition and divestiture marketplace for energy assets. Energy Sector Set For Turn Unsurprisingly for a natural resources fund manager, Konrad Krill believes the sector is set for a strong bounce and says that in the short term, consolidation in the sector will provide the spurt. With just $4.0 million under management, Krill says that selling the Orbitex Natural Resources Fund which was launched in October last year has been difficult in a period when oil prices have fallen 40 percent. "This sector has a strong offensive punch to it, as well as being defensive because valuations are so low," Krill said in an interview. He notes that the percentage of money invested in the energy sector as a proportion of the S&P 500 has fallen from 27 percent in 1980 to around seven percent now, as investors have shifted their money into high tech stocks, financials and consumer goods. "These stocks (high tech) are priced for perfection," Krill said. He says that distressed oil and gas stocks will benefit from a new wave of mergers and acquisitions and cites stocks such as Seagull Energy Corp and Canada's Ranger Oil Ltd potential takeover targets. He also believes that strong dividend yield from major oils and a reweighting of investor portfolios, albeit not back to 27 percent of the S&P 500, will drive valuations sharply higher. Eventually too, production cuts from the Organization of the Petroleum Exporting Countries, combined with a pick up in demand from distressed Asian economies and a return to normal weather patterns will feed through into earnings. He says that El Nino, which caused a warmer than normal winter in the northern hemisphere, is probably a bigger factor in the oil supply imbalance than Asian demand. "If you get just normal weather for just 6-18 months that will eat into supply," Krill said. The Orbitex fund is up one to two percent in the first half of this year as Krill benefited from owning oil service stocks such as Camco International Inc , Weatherford Enterra Inc and Western Atlas Inc , which have all been takeover targets. Of his portfolio, 15 percent is invested in large cap oil stocks, 10 percent in oil services and 25 percent in exploration and production stocks. He owns 55 stocks, a lot for such a small fund, but says that you need diversification in the exploration and production sector. "When the tide rises it will lift them all," Krill said. Other key holdings are in the Canadian energy sector, where distressed share prices, big reserves and the weak Canadian dollar has prompted a rash of acquisitions by U.S. companies. "All of the negatives are out there," Krill said. Oil Stocks Only Good For Long-Term Investors Triangle Business Journal - Raleigh/Durham How quickly we forget. Gasoline was cheap when I got my driver's license in 1970. At 30 cents a gallon, you could cruise for a week on $5. But then the unthinkable happened. Our Middle Eastern "friends," believing that we were living too high on the hog, decided to take us down a notch or two by quadrupling the price of oil - overnight. Today, the '70s mindset again reigns supreme. Speed limits are at all-time highs and "sport utes" are the vehicles of choice, even though they drink gasoline like Sherman tanks. Might we be setting ourselves up for yet another fall? Our first question takes a closer look. Q: With the price of oil at a 10-year low, should investors be buying or selling oil stocks? - A.F. A: Probably buying, but that's assuming that the buyer has a lot of patience - something for which Wall Street isn't renowned. Oil prices recently dipped below $13 a barrel for the first time since 1988, reflecting the fact that much of Asia is in recession or depression, depending upon who you believe. In such a weakened state, the Far East's appetite for oil has shrunk significantly from just a year ago when oil was $19 per barrel. OPEC says it's going to limit production to drive prices higher, but if it's successful in doing that, it would be the first time in a long while. Will things get better in the future? At some point they probably will, but itmay take a year or more, so this type of investment is only appropriate for those with a long time horizon. For the risk averse, the integrated oils such as [ Texaco ] , Mobil and [ Amoco ] may have more appeal because they are less volatile and pay better dividends. For the risk-oriented, drilling companies like Haliburton might be attractive because of their current depressed prices. Q: I heard about a mutual fund that invests in nothing but initial public offerings. What are your thoughts about this type of investment? - D.Y. A: I'd avoid it, and here's why. Every mutual fund manager wants as many shares of "hot" IPOs as he or she can get. So the IPO Plus Aftermarket Fund is not unique in that respect. What does make it unique, and what would worry me as an investor, is the fact that this fund's managers intend to invest in nothing but IPOs and will buy shares in the aftermarket when they can't get them on the initial offering. That strategy seems very risky to me. END - END - END

To: Kerm Yerman who wrote (11571)	7/3/1998 3:27:00 PM
From: Kerm Yerman	Read Replies (5) \| Respond to of 15196

MARKET ACTIVITY/TRADING NOTES FOR DAY ENDING THURS., JULY 02, 1998 (1) MARKET OVERVIEW Toronto Stocks In Lackluster Session Toronto stocks finished flat in a post-holiday session on Thursday as the attention of most North American investors drifted off ahead of the U.S. long weekend. Canadian stocks were mixed as banks rose on expectations that unchanged U.S. interest rates will allow corporate profits to grow. Declines by Laidlaw Inc. and gold producers offset the gains. The Toronto Stock Exchange 300 composite index rose 3.66 points 7370.55. About 98.2 million shares changed hands on the TSE, down from 109.4 million shares traded on Tuesday. Canadian markets were closed Wednesday for the Canada Day holiday. The financial services subindex buoyed the TSE 300, contributing 21 points to the index. The market leaned towards the negative side as losing issues outnumbered winners 535 to 437 and another 255 traded flat. "It was extremely slow as Americans left at midday to get an early start on the weekend," said Pier Donnini, head trader of institutional equities at Yorkton Securities. The few Canadians who returned from Wednesday's Canada Day holiday yawned their way through Thursday, dealers said. They also anticipate a very lackluster session on Friday when U.S. markets will shut down as the United States celebrates Independence Day, which falls on Saturday. In New York the Dow Jones Industrial Average fell 23.41 points to 9025.26 points. Toronto opened slightly firmer but lost ground, failing to catch up to New York's 96-point gain on Wednesday. Half of Toronto's 14 subindexes gained while the other half stumbled. The transportation group tumbled, falling 4.47 percent as investors rushed to sell heavyweight Laidlaw Inc. Laidlaw was the talk of the market. Laidlaw shares (LDM/TSE) plunged $2.05, or 12%, to $15.70. North America's largest bus and ambulance services company, posted its biggest decline since March 1991, after a U.S. Tax Court ordered it to pay US$141 million in back taxes and interest, ruling that it used a Dutch unit to avoid taxes. While the company said it believes the court ruling is wrong and intends to appeal, it also said it may owe as much as US$500 million for the 1986-1994 period if the ruling is extended to other overseas units. Laidlaw stock has plunged 33% since hitting a 52-week high of $23.40 on March 17. Bank of Nova Scotia (BNS/TSE) rose 85› to $37.25, Bank of Montreal (BMO/TSE) gained $1 to $82, Canadian Imperial Bank of Commerce (CM/TSE) jumped $1.05 to $48.35 and Royal Bank of Canada (RY/TSE) climbed 95› to $89.45. The Toronto Stock Exchange Oil & Gas Composite Index gained 0.5% or 32.56 to 6102.19. Among sub-components, the Integrated Oils gained 0.8% or 6594.20. The Oil & Gas Producers gained 0.5% or 25.64 to 5404.89 and the Oil & Gas Services gained 0.2% or 3.67 to 24.09.53. The price of West Texas crude rose US13› to US$14.50 a barrel on the Comex division of the New York Mercantile Exchange. On Monday, Devon Energy Corp. agreed to buy Northstar for $1.29 billion in stock and assumed debt to create one of the 15 biggest U.S. oil and gas exploration companies. Northstar Energy Corp. (NEN/TSE) was the most active issue on the TSE, rising 45› to $11.65 on volume of 7.4 million shares. That compares with its three-month trading average of 368,300 shares. Suncor Energy Inc. (SU/TSE) rose $1 to $51 and Canadian 88 Energy Corp. (EEE/TSE) gained 65› to $6.75 on optimism that a second round of supply cuts from many of the world's largest oil producers will alleviate a global surplus and lift prices. In addition to Northstar Energy, Tarrington Oil & Gas, Pinnacle Resources, Beau Canada Exploration, Crestar Exploration, Renaissance Energy, Abacan Resources, Poco Petroleums, Gulf Canada Resources and Canadian Natural Resources were listed among the top fifty most active traded issues on the TSE. Northrock Resources climbed $1.20 to $16.50, Pioneer Natural Resources $1.20 to $34.70, Suncor Energy $1.00 to 51.00, Rio Alto Exploration $0.90 to $17.15, Seven Seas Petroleum (u) $0.85 to $21.10 and Paramount Resources $0.70 to $14.70. Dreco Energy Services was the only service related issue making the list, gaining $3.40 to $42.40. On the flipside, Canada Southern Petroleum fell $0.95 to $8.55. Tesco fell $1.65 to $8.55. Gold, precious minerals and base metals also lost ground. Barrick Gold Corp. (ABX/TSE) slipped 85› to $27.15, Placer Dome Inc. (PDG/TSE) slid 60› to $16.50 and Teck Corp. class B shares (TEKB/TSE) slipped 55› to $15.50 as the price of bullion tumbled US$2.30 to US$294.10 an ounce on the Comex division of the New York Mercantile Exchange. The stronger side included media, financial services and paper and forestry products. Other Canadian markets closed higher. The Montreal Exchange portfolio rose 11.56 points, or 0.3%, to 3741.87. The Vancouver Stock Exchange gained 2.87 points, or 0.5%, to 535.07. Over on the Alberta Stock Exchange, the combined value index gained 2.15 to 2092.04. However, decliners edged out advancing issues 131 to 1125, with another 116 issues remaining unchanged. Oil related issues among the top 25 most active traded issues included HEGCO Canada, Alta Pacific Capital, First Star Energy, ICE Drilling, Belair Energy and Raptor Capital. HEGCO Canada gained $0.35 to $2.75, Red Sea Oil $0.30 to $1.95, Solid Resources $0.25 to $7.20, Progress Energy $0.20 to $4.25, Alma Oil & Gas $0.19 to $0.54, BW Technology $0.15 to $3.80, Corlac Oilfield $0.15 to $0.90, Energy North $0.15 to $0.15 to $0.40, Kintail Energy $0.15 to $0.85 and Request Seismic $0.12 to $1.85. On the downside, Stellarton Energy fell $0.30 to $2.15, Proprietory Energy $0.20 to $3.85, Niko Resources $0.15 to $4.20, Bolt Energy $0.10 to $0.35, Corridor Resources $0.10 to $1.40 and Sunburst Oil and Gas $0.10 to $0.40. The Canadian dollar closed weaker from its open on Thursday, hurt by a fresh round of strength in the U.S. dollar caused by Japan's ongoing economic woes. The Canadian unit weakened to close at C$1.4675 (US$0.6814) on Thursday from its open of C$1.4645 (US$0.6828). Dealers said much of the Canadian dollar's decline was linked to weakness in the Japanese yen. The yen weakened against other major currencies after Japan added no additional measures to its plan to restore banking system health and was mum on permanent tax cuts. The slide in the yen helped U.S. dollar to strengthen, which in turn weighed on Canada's currency. "The move above C$1.4650 was pretty much driven by stop loss orders that were placed by short-term traders looking for Canada to do better," said one currency dealer with a bank owned brokerage. Dealers said the slide was orderly and flows about normal. The market is expected to be very quiet on Friday with most U.S. financial markets closed for the holiday weekend. On the crosses, the Canadian unit firmed to 1.2401 marks from 1.2306 marks and firmed to 95.79 yen from 94.67 yen. NEW YORK U.S. stocks fell on the third-lightest trading day of the year after government reports on jobs and manufacturing suggested that profits could suffer from a slowing U.S. economy. The Dow Jones industrial average fell 23.41 points, or 0.3%, to 9025.26. The Standard & Poor's 500 composite index dropped 2.14 points, or 0.2%, to 1146.42. The Nasdaq composite index slipped 20.46 points, or 1.1%, to 1894. Just 509 million shares changed hands on the New York Stock Exchange, down from 687.4 million shares traded on Wednesday. Parametric Technology Corp. (PMTC/NASDAQ), which makes software that helps engineers design cars, planes and heavy equipment, tumbled US$8 3/4 to US$16 1/6. The company said its revenue for the third quarter ending in July would be about 15% below the average estimate of US$292 million to US$300 million. Sun Microsystems Inc. and International Business Machines Corp. fell after Salomon Smith Barney Inc. analyst John B. Jones lowered earnings estimates for the companies -- both of which have extensive operations in Asia. IBM (IBM/NYSE) lost US$1 5/8 to US$115 3/16 and Sun (SUNW/NASDAQ) dropped US$2 7/16 to US$42 1/2. Netscape Communications Corp. surged fon speculation that the Internet browser firm may attract an investment from a large media company. Netscape (nscp/nasdaq) rose US$5 5/8 to US$41 5/16. U.S. Industries Inc. (USI/TSE) tumbled US$5 11/16 to US$19 15/16 after the company said it will take US$180 million in charges over two quarters for acquisitions, staff cuts and writing down assets from a discontinued furniture line. INTERNATIONAL Asia Enjoys Broad Gains 'Bridge bank' and world market surge bode well for all; HK rises 3.8 percent The promise of a "bridge bank" in Japan and sustained gains in world markets continued to send major stocks exchanges in Asia higher Thursday. Gains were pared somewhat by investor efforts to lock in profits on a weakening yen. Among the major markets Hong Kong turned in the region's strongest performances, posting a gain of 3.8 percent gain. In Tokyo, shares closed moderately higher on Thursday, carrying on a seven-session winning streak amid hopes for government plans to reinvigorate Japan's ailing banking system, brokers said. The benchmark Nikkei 225 average closed up 108.69 points, or 0.66 percent, to 16,471.58. The index briefly surged as high as 16,743.36. A strong rally in the morning fizzled later, as domestic institutional investors were eager to lock in profits above 16,527.17, the level at which the Nikkei average closed on March 31, the end of the last fiscal year, brokers said. Many Japanese companies close their books on March 31 and they realize the value of their stock holdings based on the year-end price. "Hopes for 'bridge banks' dominated the stock market today," said Tetsuya Ishijima, chief strategist at Okasan Securities Co. Ltd. Brokers said they were waiting for Thursday's formal announcement of a government package on the creation of a "bridge bank" system for winding up failed banks without bankrupting their relatively sound creditors. The widely anticipated announcement came after the market closed. "There has clearly been a shift from on high in terms of resolve to help Japan deal with troubled institutions," said Coen Kluyver, a manager at ING-Barings Securities. Keiko Kondo, strategist at Merrill Lynch Japan Inc., said: "We can't see any negative factors on the horizon and the Nikkei 225 will likely maintain a firm tone at least until the July 12 Upper House elections." Some brokers said the rally was characterized by a marked change in sentiment. One fund manager forecast the Nikkei average would rise to 17,500 before the July 12 elections. Trading was active with 924 million shares changing hands on the first section of the Tokyo Stock Exchange (TSE). Hang Seng sings - Hong Kong stocks raced to a higher Thursday close, taking their cue from stronger overseas markets and a Chinese interest rate cut, brokers said. The Hang Seng Index jumped 323.06 points, or 3.78 percent, to end at 8,866.16 after hitting a high of 8,970.74. Turnover picked up to a healthy HK$7.98 billion against Tuesday's quiet HK$4.47 billion. "I think we will close the week on a fairly positive note, but next week is still uncertain because the euphoria could easily subside," said Andrew Fernow, director of research at Vickers Ballas. "I would be cautious on chasing stocks much higher than 9,000 because I think the downside is still going to be there for a while," he said. The Hong Kong market continued to be closely correlated to developments in Japan, which investors were watching for further guidance, brokers said. On Thursday, the blue chip index retreated from earlier highs as the U.S. dollar gained strength against the yen after Japan's "bridge bank" draft plan offered few surprises. The Japanese yen was trading at 138.99 to the dollar against 137.85 in New York on Wednesday. "I don't see any long-term funds coming back in a large scale," said Sean Li, associate director at Amsteel Securities. "Foreign investors are still observing whether the Japanese government can do a successful reform of the economy, which would help regional markets to stabilize," he said. Sydney rides the gain train - Strong gains in Tokyo, Hong Kong and New York helped push the Australian share market broadly higher on Thursday, with institutional investors seen as keen buyers at the start of the 1998/99 financial year. The All Ordinaries index rose 43.3 points or 1.6 percent to 2,742.7 on high turnover of A$1.22 billion (US$756.4 million). "Oversold situations are being bought back," said Joseph Pagliaro, a client adviser at Brisbane-based Wilson HTM. "That's the theme of the market." "There's been a lot of speculation of positive ne to come out of Tokyo," dealer Oliver Messenger of Austock Brokers said. Singapore stays firm - Singapore blue chips ended firmer on Thursday, supported by selective buying, dealers said. But the initial euphoria over Japan's economic plans for its ailing banking sector was drooping along with the yen as the Straits Times Industrials Index closed up 29.77 points, or 2.72 percent, to 1,124.87, off its high. "There's been profit taking coming in because the yen has weakened," said a dealer with a local investment house. If the yen should head back to 140 per dollar after Japan's plans for a "bridge bank" to recapitalize its ailing banks are absorbed, share prices would fizzle again, he said. The yen was around 139.45 in late afternoon trade after rising just above 138 earlier in the day. The index was lifted mainly by Singapore Press, which rose Singapore 70 cents to S$12.70. Dealers said it was a popular trading stock in a market racked by jitters, where second and third liners were avoided. Bright news elsewhere in the region - Other markets in the Pac Rim enjoyed significant gains Thursday. Philippine shares gained more than 4 percent while key indices in Taiwan and Thailand were up more than 3 percent. In the Philippines, the PSE index rose 74.23 points, or 4.17 percent, to 1,856.19. Taipei's Weighted index gained 268.30 points, or 3.55 percent, to 7,817.11. In Bangkok, the SET index went 10.65 points higher, or 3.98 percent, to 277.98. Europe Calms After Surge Paris, Frankfurt post early highs before flattening; London steers steady European stock markets retreated from earlier highs after Japan's plan to help its ailing banks disappointed traders looking for stronger economic measures. The yen also fell to below 140 to the dollar. It began its sharp decline from around 138 as finance ministry and government officials in Tokyo unveiled details of the reforms, revealing they were largely in line with what the market had expected and did not contain any surprise moves on tax cuts. In Paris and Frankfurt stocks opened up over 1 percent to fresh highs, before falling back, with a similar move in London. Metals markets remained under pressure as traders took a sour view of the outlook for the Japanese economy, with aluminum reaching a four-year low and nickel hitting a four-and- a-half-year low. Copper was also looking vulnerable following Wednesday's crash to 11-year lows as funds and banks bet the slump in Asian economies will slash demand for the industrial metal. The weakness in the yen was also attributed to a report that U.S. Treasury Secretary Robert Rubin quashed speculation of possible joint intervention with China to support the Japanese currency. This encouraged dollar bulls who had been held back by fears that the U.S. Federal Reserve and Bank of Japan could carry out dollar/yen selling to coincide with Japan's bridge bank announcement. Despite the subdued reaction, the markets see the plan as positive, having accepted that any plans to fix Japan's banking system will take time, analysts said. "It will be expensive and take a quite a long time to implement fully . . . but it's probably feasible and it's a step in the right direction," said Rob Hayward, strategist. London stays sturdy - The FTSE 100 made a sturdy move towards the psychologically important 6,000-point level early in the day, with big gains coming on the back of Japan's bank reform plans. By late morning, the FTSE was up 57.0 points, or 0.96 percent, to 5976.9. Fresh funds flowing into the market at the start of the new half and strong gains on European bourses added support. "Japan's behind it all but we've had a good showing on Wall Street, S&Ps are doing well, Europe's looking good and it's the beginning of the second half with some new money coming in," said one dealer. French bourse booms then flattens - France's blue-chip stock index surged to record highs in early trade on Thursday, but brokers warned that volume might not be strong enough to sustain further gains. By mid-morning, the CAC-40 index was up 1.01 percent at 4303.69 points, breaking a previous all-time best of 4303.29 set just after the open. By late morning, however, gains were pared to a rise of 9.76 points, or 0.23 percent, at 4270.44. Some in the market predicted the early morning surge, propelled by investor cheer over the stronger yen and worldwide optimism over expected Japanese bank reforms, would be followed by consolidation.. "Theoretically, as people turn back to Asia, we will begin to see money coming out of Europe," one dealer said. "In addition, most people have predicted a resistance level of 4,500 for the year end, so the market only has limited upside." For the moment, renewed interest in stocks that have Asia exposure, such as luxury goods manufacturer LVMH, is likely, he said. Shares in LVMH were up 1.34 percent at 1287 francs in mid-morning trade. Bank stocks will also be newly attractive on the same wave of Asia relief, the dealer said. Renault and Peugeot were also early gainers following news on Wednesday that French June car sales were up. German stocks lose steam - Like Paris, Germany's stock exchange surged early in the day. Germany's benchmark DAX index looked bound to break through the 6,000-point threshold on Thursday after inching to a new record high in early trade, fueled by stronger markets in the U.S. and Asia. But by late morning trade, activity was more subdued. The DAX was up 28.75 points, or 0.49 percent, to 5935.60. German shares seemed largely unaffected by a stronger dollar, which was trading at 1.8207 marks. END - END - END