To: marc chatman who wrote (36466 ) 2/1/1999 5:33:00 PM From: Gary Burton Respond to
DLJ comments on osx Jan29--maintain Outperform rating--"we still expect the first half to represent trough earnings since spending is down far more than the low budgets set by the oil companies, and we expect a modest increase in spending in the 2nd half...sector sold off this week due in part to possible portfolio liquidation by a fund holding large positions in osx stocks...We expect inventories to decline and oil prices to recover as a result of production declines caused by the dramatic drop in drilling activity.NG prices were unchanged.With inventories still 25% above last year's levels, the market is concerned that they will not be drawn down sufficently by the end of winter..while over the next 2 months weather will influence this,the precipitous drop off in drilling activity coupled with depletion rates is almost certain to lead to significant decline in NG production by the 2nd Half. Consequently, we continue to be bullish about NG prices for 99...with the continued collapse in eps estimates, the multiples for the large cap stocks are approaching their historical averages.However, since we expect 99 to be a trough earnings year, we expect multiples during the year to be far above the average for the last few years..The mid cap service stocks are still well below historical multiples.. for the equipment contractors we find pe analysis much less usefull at this juncture than asset values.On that measure the drillers are 20% above historical trough multiples..." DLJ likes WFT,HAL and FLC as continued Top Picks (underwriting connections?)along with JRM/MDR, BJS and ESV and NBR. They rate all their followed stocks as Buys except for Halter,PKD,TDW,RIG,GW and SLB all of which they rank as Hold. They don't follow VTS or RDC. fwiw
