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

To: Crimson Ghost who wrote (34689)	1/10/1999 4:11:00 PM
From: Gary Burton	Read Replies (1) \| Respond to of 95453

try nytimes.com you may have to subscribe-free- article entitled "The Oil patch Shows Signs of Life"

To: Crimson Ghost who wrote (34689)	1/10/1999 4:11:00 PM
From: Crimson Ghost	Respond to of 95453

January 10, 1999 MARKET WATCH The Oil Patch Shows Signs of New Light Related Articles The New York Times: Your Money The New York Times on the Web: Mutual Funds Quarterly Report Forum Join a Discussion on Investing By GRETCHEN MORGENSON EW YORK -- In our brave new world of investing, assets are out and ether is everything. Tangibles like a rising book value at a company or even significant growth in corporate earnings are no longer required by investors who are looking to justify their stock purchases. Rising share prices are what counts. So, while investors' ardor for Internet and other technology companies drives those stocks to the heavens, many companies with hard assets underlying them -- oil and gas concerns, for example -- have been left for dead. That many are trading at extreme discounts to their assets matters not to investors dazzled by ether stocks. Investors shun oil shares today because of the depressed state of crude-oil prices. A barrel of West Texas intermediate fetched about $13 on Friday, down from almost $17 a year ago. But in just three weeks, oil prices have jumped 26 percent from their 12-year lows of $10.35 a barrel. As a result, some investors think the outlook for oil -- and some oil-related equities -- may be brightening. The price of oil has fallen because there's just too much of it. Demand for oil grew 1 percent to 2 percent worldwide last year, but production remained high. The oversupply shows signs of lessening a bit, however. Last week, oil prices jumped on news of the biggest decline in United States oil inventories in 18 years. More important, capital spending by oil companies is plummeting. Michael Spohn, principal at Petroleum Research Group in New York, says such investment will fall 10 percent to 20 percent from 1998 levels at American companies this year. "Because they are cutting capital expenditures now, productive capacity will be below expectations in the future," Spohn said. "But there is a lag between spending and production, so you don't see it in the numbers right away." At the same time that supply is shrinking, some investors think the demand for oil may increase this year in parts of the world. If rebounding stock markets in parts of Asia are indicating a turnaround there, demand from that region may increase. Asia accounts for roughly one-quarter of the world's oil demand. One sign that oil stocks' fortunes may be rising is that the shares no longer fall on bad news. On Thursday, Smith International, a large oil-services company, warned investors that its fourth-quarter earnings would likely be between 25 cents and 27 cents a share, not the 36 cents a share that Wall Street had hoped for. The shares rose $3.65. Of course, not all oil-related shares are buys. Some of the biggest companies are not cheap, according to Spohn, and some of the smallest, with heavy debt loads, could find themselves on the ropes if oil prices stay low. Three of the best values in the oil patch, Spohn said, are ARCO, Kerr-McGee and Unocal. ARCO is trading at a 22 percent discount to its asset value, as he reckons it, and the shares pay a 4.3 percent dividend. Kerr-McGee, out of favor among investors because of its announced merger with Oryx Energy, trades at a 41 percent discount and pays a 4.6 percent dividend. And Unocal, which closed on Friday at $32.75, has a value of $42 a share, Spohn said; he considers Unocal a takeover candidate to boot.