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Gold/Mining/Energy : Canadian Oil & Gas Companies -- Ignore unavailable to you. Want to Upgrade?

To: Richard Saunders who wrote (5504)	10/20/1998 8:19:00 AM
From: Kerm Yerman	Read Replies (2) \| Respond to of 24892

Richard / debt to cash flow The average debt to cash flow multiples are now about 2.6X for oil and gas producers - not including the integrated's. What we should be looking at now are the cash flow projections for year ending 1999 and then calculate debt to cash flow numbers using that number. This would indicate how companies are working out of this financial burden. We must also be assured we are looking at good up to date forecasts. You don't want to base your analysis on numbers established almost a year ago. Keep in mind, most companies had cut back their budgets by mid 1998. Then, be satisfied the "assumptions" the companies used are within reason. If not, adjust the numbers based upon "sensitivity" factors. Next, assure yourself that the company is on target meeting their production objectives. It's quite noticable that most companies are falling short of their production goals. Delays hurt, but falling short due to poor drilling results is a killer. At the current time, premium must be placed on effective management. If you pay attention to these few fundamentals, you should survive this downturn and be in position to reap the rewards when the oil scenario turns positive. What we have seen in the markets this past 10 days can be temporary. Rate cuts are helpful, but are just a tool to stimulate investment. There is consistent pressure on oil pricing - that's bad. The overall world financial scene that's existed most of this year isn't going to dissapear overnight. Major countries, with Japan being an example, are beginning to impliment real strategies to improve their outlook. Only recognition in achievement will provide market momentum. The region most benefital to oil and gas will be the Far east. That region provided 80% of the annual growth for the industry. Bottom line is this. Don't get to excited with current market activity. Expect sideward movement with share prices trending a little lower over the short term. Then, anticipate a narrow trading range in oil shares. Although it can go unsaid, focus on the gas leveraged companies over the short term. Just one person's opinion.