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Non-Tech : Abraxas Petroleum (AXAS) -- Ignore unavailable to you. Want to Upgrade?

To: READE SMITH who wrote (23)	2/27/1999 9:45:00 PM
From: Robert T. Quasius	Respond to of 67

Im glad I waited. Now, perhaps I can pick up some at $1. Here's a good story about natural gas. BARRON'S-Natl Gas, Rig Utilz'n, Bottom Search&Why! Gas Tanks Too Full? Output cuts should firm prices [HEADLINE] By Cheryl Strauss Einhorn [Initial paragraphs dealt with grains]... >>Eventually, though, today's pain and penury may lay the basis for tomorrow's bull markets. In some commodities, such as natural gas, two tales already are developing -- the divergence between short-term and long-term fundamentals. Result: An opportunity to sell nearby gas futures and perhaps to buy the January 2000 contract. >>At present, April natural-gas prices are trading at new contract lows at $1.65 per million British thermal units, their lowest level for the month of February since 1995. Still, "we need another leg down to $1.50 in the 'shoulder month' contracts of April or May," says Schroder gas analyst Bill Featherston, referring to the span between the winter heating season and the summer cooling period. "But looking out to next year, the January contract at $2.35 doesn't seem expensive," he says. Driscoll is even more enthusiastic about the long-term view. He thinks gas could average $2.10 for 1999, which is up 5% from his earlier '99 outlook. Next year, he optimistically thinks gas prices will average $2.75, or 17% above his prior 2000 forecast just months ago. The reason for the change in the gas outlook is the same as it was for hogs months earlier, which itself is the same for every business that loses money over a period of time: The pain threshold was reached. "The gas companies are in such sorry financial shape," says Driscoll, who claims things haven't been this bad for the industry in a decade. Result: "These companies can't put money to work to increase production now." Thus, while natural-gas drilling has been declining in tandem with falling prices all winter, the decline actually is accelerating now. The rig count has fallen from a peak of 650 in December to 420 last week. "We expect it to bottom below 400 before turning upward later this year," says Driscoll. He points out that it takes approximately 525 rigs just to maintain current gas production -- a count far above typical drilling activity, which has averaged just over 400 this decade. But the industry averaged 565 rigs in 1997 and 562 last year. Yet despite the jump in rigs during those years, the resulting production increases were only 0.6% and 0.3%, respectively, in part because new technology allowed companies to tap gas reserves more efficiently. This allowed companies to deplete reserves more rapidly and boost their net present value. Surprisingly, though, those very modest production increases were enough to satisfy demand the past two years given the unusually warm winter weather in the U.S. and increased imports from Canada. Now with the rig count down so sharply, natural-gas production is likely to fall throughout 1999 and into 2000. Driscoll estimates the year-over-year decline should grow from 400 million cubic feet per day in the first quarter of this year, to over one billion cubic feet per day by the second half of next year. Tightness should begin to manifest itself by mid-year. Consequently, "sharply higher prices should follow," predicts Driscoll. Near-term, though, prices remain under pressure because current storage levels of gas are massive. They're over 700 billion cubic feet above the five-year average with only about six weeks of winter left. Given that the last two winters have been among the warmest in over 100 years, and that storage levels are quite sensitive to the weather, it's not likely stocks will be drawn down much. Still, it is interesting to note that on the few cold weeks we've had this winter, when we've needed to draw down storage, we've done so at the same rate as in cold weeks last year, meaning that the market's underlying supply-demand relationship has not changed. Once again, low prices are proving their own best cure by bringing supplies in line with demand.###

To: READE SMITH who wrote (23)	4/8/1999 6:15:00 PM
From: Robert T. Quasius	Respond to of 67

Look at this interesting article. It suggests that the bottom has already occurred, and there is a lot of money to be made from the debt securities of highly leveraged energy companies. April 8, 1999 Heard on the Street With Dow at 10000, Vultures Still Find Places to Scavenge By RANDALL SMITH Staff Reporter of THE WALL STREET JOURNAL The economy is booming. The Dow Jones Industrial Average Wednesday hit another record. So what is left to do for vulture investors and workout artists while everything is hunky-dory? The answer is: Not everything is hunky-dory. And so Leon Black and Wilbur Ross, two of Wall Street's best-known specialists in scooping up beaten-down securities, are busying themselves in distressed corners of other markets. Mr. Black has just committed funds to a real-estate investment trust joint venture, ARCap, that will buy battered issues of commercial mortgage-backed securities, a sector still reeling from the after-effects of the bond-market meltdown triggered last summer by Russia's default. Mr. Black's Apollo investment organization views this as "an interesting opportunistic time," says Richard Mack, an Apollo principal. Bruce Harting, who follows mortgage and specialty-finance companies at Lehman Brothers, says the fundamentals of the real estate underlying most CMBS securities remain sound, and that prices on the securities "will eventually come back." If that doesn't happen, Mr. Mack says, Apollo is "prepared to hold this stuff to maturity." One way or another, Apollo believes "equity-like returns" topping 20% are possible. Meanwhile, funds run by Mr. Ross have been buying distressed junk bonds issued by energy companies that have been hit by last year's big downturn in oil prices. The Rothschild investment banker has been working on a proposed restructuring of $125 million in debt issued by Anker Coal Group. Mr. Black is a former mergers specialist who gained renown in the 1980s at Drexel Burnham Lambert, the junk-bond house that later collapsed, and then carved out a second career as a vulture investor in the 1990s. Many of his biggest plays involved junk bonds issued by companies that fell on hard times. His Apollo Real Estate Advisors has just joined forces with a partner in Dallas to create ARCap, which has been initially capitalized with $125 million. The market for packages of commercial mortgage-backed securities mushroomed in the 1990s from annual issuance of $14 billion in 1992 to $78.3 billion in 1998, according to Donaldson, Lufkin & Jenrette. Such CMBS securities were assembled after slicing and dicing the underlying mortgages to create securities that ranged in risk from investment grade down to the most speculative junk. As the market evolved, some of the biggest buyers of such securities became real-estate investment trusts, many of which tried to boost their returns by taking bigger positions with borrowed funds. But the Russian debt crisis, followed by the near-collapse of Long-Term Capital Management -- the hedge fund that held huge positions in all types of risky bonds including CMBS issues -- touched off a bout of relentless forced selling by mortgage REITs. One of the most prominent, Criimi Mae, sought bankruptcy-law protection from creditors last October. With few bids available, yields on the riskiest types of nonrated CMBS securities rose from levels of 16% to 18% at the market's buoyant peak to a range as high as 30%. The market has yet to recover; the same securities are yielding a still-lofty 25% to 27%. Larry Duggins, president of the new ARCap venture, said the "tremendous dislocation" in the market has created "a tremendous buying opportunity." Mr. Duggins's Dallas-based firm REMICap is Apollo Real Estate Advisors' partner in ARCap, which is also being funded by five institutional investors. At Rothschild, Mr. Ross, who became a prominent workout negotiator in the early 1990s, has himself become a vulture investor -- like Mr. Black, in a way, but on a smaller scale. Rothschild is raising what it hopes will be a roughly $500 million-asset Asian Recovery Fund to invest in distressed securities in Asia. Meanwhile, over in the oil patch, another Rothschild fund has been buying distressed bonds issued by energy companies such as Forcenergy, Gothic Energy, Hurricane Hydrocarbons, KCS Energy, National Energy, Northern Offshore, Southwest Royalties, and Transamerican Energy. As a holder of bonds issued by Anker Coal, Rothschild has been working with the Morgantown, W. Va., company on a proposal to restructure about $125 million of bonds in a way that would give the company some breathing room and give Rothschild an equity stake. Mr. Ross, who estimates that $10 billion of junk bonds were issued around 1997 by energy companies before oil prices fell, believes that similar debt-restructuring deals could boost the prices of some of the other distressed energy bonds as well. "I think this is an unparalleled opportunity," Mr. Ross said, to take advantage of the discounts in the junk-bond prices created by the oil-price drop.