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

To: Kerm Yerman who wrote (13077)	10/29/1998 12:40:00 PM
From: Kerm Yerman	Read Replies (4) \| Respond to of 15196

ANALYST COMMENTARY / Big Oil Needs Rethink - Not Just Trim, Analysts Say NEW YORK, Oct 28 - Mobil Corp. ended a truly miserable quarter for U.S. oil majors when it reported a 45 percent drop in earnings, prompting analysts to say internal cost-cutting is not enough, given the industry's poor prognosis. Mobil said that what it terms "self-help" measures cut $55 million from costs in the third quarter, but that was swamped by a $6-per-barrel drop in oil prices to 12-year lows, which slashed $250 million off earnings compared with last year. Lucio Noto, chairman and chief executive of the nation's second largest oil company, promised more cuts to come and said Mobil would join the list of those planning to reduce capital spending. "In response to continuing weak market conditions, the organization will accelerate efforts to implement new self-help initiatives," Noto said in a statement. Earnings declines at the world's biggest oil companies in the third quarter have ranged from a drop of 23 percent at Exxon Corp. <XON.N> to 37 percent at Chevron Corp. <CHV.N>; 45 percent at Mobil <MOB.N>; 49 percent at Amoco Corp. <AN.N>; 56 percent at Texaco Inc. <TX.N>, and 80 percent at Atlantic Richfield Co. (ARCO) <ARC.N>. "Without belaboring how bad third-quarter results were, our main conclusion is that it is not going to get any better in the fourth quarter," Deutsche Bank Securities analyst Michael Young said in a research report. Just how bad it is can be seen in the industry's return on capital. At Mobil, the third-quarter figure was 11 percent and at Amoco, 8.8 percent. There is little on the horizon to suggest any recovery. And analysts say that cutting exploration and production spending will hurt big oil's earnings down the road. "These companies are cutting costs, but that is a drop in the ocean compared to the fall in oil prices," said Fadel Gheit, analyst at Fahnestock & Co. "In this environment, a crash diet to lose weight in a week is not the answer. They really have to rethink their business." Even after 3.1 million barrels per day of output cuts agreed to this year from oil-producing nations, the price of the benchmark Brent blend is still under $13 per barrel, the long-term slide in U.S. refining margins is continuing and the chemicals sector is set for a prolonged slowdown. The need for a rethink, Gheit says, means more mergers like the one between British Petroleum Co. Plc <BP.L> and Amoco, which promises $2.0 billion in savings from the creation of the world's third-largest oil company by market value. The combined company will rank worldwide behind only Royal Dutch/Shell Group <RD.AS><SHEL.L> and Exxon. To be fair, analysts say Mobil was one of the trailblazers with its European refining and marketing deal with BP to create $500 million a year in savings for the two companies. Since then, the tide of history has washed past with BP/Amoco and the tide of strong oil prices has receded. Mobil, based in Fairfax, Va., has been rebuffed in its attempt to form a downstream, or refining and marketing, venture with Amoco of Chicago. And Mobil lost out in its run at parts of Conoco Inc. <COC.N>, of which DuPont Co. <DD.N> just sold 25 percent to the public for $4.4 billion, in the largest U.S. initial public offering ever. DuPont, based in Wilmington, Del., plans to spin off the rest of its Conoco stake within a year. "I am surprised it has taken them so long," said Gheit. "I have been waiting for them to drop the second shoe." Mobil has been touted as a merger partner for San Francisco-based Chevron or Los Angeles-based ARCO. And while the company has declined comment on specific instances, it did confirm that it had consulted its bankers on merger options and was watching for opportunities. On Wednesday, Mobil's stock fell 75 cents to $72.875 a share in composite New York Stock Exchange trading. Exxon's stock rose 69 cents to $70.25; Chevron's shares fell 62.5 cents to $78.50; Amoco's stock rose 50 cents to $55.375; Texaco's stock slipped 31.25 cents to $59.19, and ARCO's stock fell 81.25 cents to $68.6875.

To: Kerm Yerman who wrote (13077)	10/29/1998 12:41:00 PM
From: Kerm Yerman	Respond to of 15196

EVENTS / Today In The Energy Markets - October 29th THURSDAY, OCTOBER 29 CAPE TOWN - Sixth International Energy Conference. Oil exporters and importers, energy ministers from some 30 countries, the majority of the members of the Organization of the Petroleum Exporting Countries (OPEC) and the European Union will be present (To October 31). ABERDEEN - Fifth Atlantic Margin conference to be held at the Marcliffe at pitfodels in Cults, Aberdeen organised by the Robert Gordon University. The conference will address issues relevant to oil development in the North Atlantic but for the first time will also focus on the increasingly important West African deepwater operations. Enquiries to Jane Oliver on +44 1224-263101 or fax +44 1224 263100. DUBLIN - One-day conference on emissions trading as a possible government policy instrument with junior Enterprise Minister Joe Jacob attending 1100 GMT. Emissions trading allows companies or countries to buy or sell credits based on their performance in minimising their output of carbon dioxide and other greenhouse gases thought to be harmful to the earth's atmosphere. The trade is expected to be one of the key components allowing developed countries to meet emissions reductions agreed last December at the United Nations climate conference in Kyoto. HELSINKI - Utilities federation Sener seminar on energy market. News conference at 1000 GMT. LIMA - Forum on Privatisation in the Oil Sector, organised by the national privatisation commission. LONDON - Trade, Investment and the Environment conference organised by the Royal Institute for International Affairs at Chatham House. Keynote speakers include Renato Ruggiero, director general of the World Trade Organisation ( To October 30). LONDON - Conference on derivatives modelling and analysis. The Cafe Royal, 0820 GMT. Chaired by Dr Eric Reiner, managing director of UBS, who speaks on volatility rules and implied processes at 0930. Other speakers mainly academics. Conference organised by Risk Conferences. LONDON - Exploiting New Opportunities and Profiting From Recent Developments in the Competitive and Rapidly Changing UK Gas Market conference (Final day).