Hi Douglas:
I'm going over industry wide inventories; by any measure high and still rising. Rig counts in the US, rotary rigs at half the levels of 2 years ago. Obviously the US oil industry has been dessimated. Distillate inventories are seasonally high. Refiners have cut back production to try to draw down inventories. Low oil prices on the other hand should shoulder up our economy but oil producing countries still are going to be hurt until we see a swing in crude prices. The indication is that gasoline prices at least east of the Rockies will stay flat to down for the first 6 months of the year.
On paper you would have to be insane to buy this sector now but that is what I see happening. Every day that goes by w/o a complete melt down solidifies the base that is building.
Here is some good reading if you get the chance......
NEW YORK--(BUSINESS WIRE)--Feb. 8, 1999--Leading analysts examine the Major Integrated Oils Industry in the just-published edition of The Wall Street Transcript, a vital review for investors and companies.
1) An in-depth roundtable forum featuring four prominent analysts: Sanford Margoshes of Loeb Partners, John Parry of John Herold, Inc, Alvin Silber of Herzog, Heine, Geduld, Inc., and Michael Young of Deutsche Bank Securities. The panel discusses the outlook for Chevron (NYSE:CHV) and Texaco (NYSE:TX), regulatory climate, dividend forecasts, acquisition candidates, petrochemicals, small-cap stock picks and the Exxon-Mobil (NYSE:XON) (NYSE:MOB) merger. While investors anticipated consolidation in the sector, Young states, "I think that there was an expectation that the stronger companies would acquire the weak, and actually that is not what happened. The strong merged with the stronger." Regarding the bottoming of oil prices, Margoshes declares, "I believe that the rise in crude prices already in motion will continue. It's clear to me we've seen the bottom. I think we're going to average between $14 and $15 WTI."
Looking forward, Silber asserts, "I expect that a tightening of the supply/demand balance for natural gas will develop in the domestic market in 1999. Since you can't import natural gas supply from OPEC, E&P companies that are predominantly natural gas producers could be benefited by a fairly significant increase in the price of gas in the coming year."
Other topics addressed by this distinguished panel: changes in business focus, earnings outlook, investment approaches, and the future outlook for the sector.
The panel offers several investment recommendations, including: Tesoro Petroleum (NYSE:TSO), Kerr-McGee (NYSE:KMG), and Hurricane Hydrocarbons (Nasdaq:HHLAF) about which Margoshes forecasts, "I think there is a good chance they will be bought out in the next 12 months."
2) An "Off-the-Record" survey of analysts and industry experts, who praise and/or criticize 13 Major Oil companies and managements, includes several recommendations and a few admonishments. High praise for John Browne of British Petroleum Amoco (NYSE:BPA) because "he seems to be a step ahead." An industry specialist adds, "John Browne may very well emerge as the Rockefeller of the 21st century."
Resounding applause for Lee Raymond of Exxon Corp. (NYSE:XON) because "Exxon is the best run oil company in the world and obviously that is due to the leadership of Lee Raymond." An institutional source declares, "The best of them all, the most disciplined by far is Lee Raymond."
But, another major oil's management is labeled "the team that can't shoot straight" whose recent divestiture is summarized as "A less than brilliant idea is another way of saying stupid almost."
3) In-depth interviews with the CEOs from RiboGene, Inc. (AMEX:RBO), Gerber Scientific (NYSE:GRB), and Harmon Industries (Nasdaq:HRMN).
Other companies mentioned in this special 32-page Major Oils Industry section include:
Amerada Hess (NYSE:AHC), Atlantic Richfield (NYSE:ARC), Cabot Oil & Gas (NYSE:COG), Crown Central (AMEX:CNP.B), EEX (NYSE:EEX), Enron Oil & gas (NYSE:EOG), Gulf Canada Reserves (NYSE:GOU), Norsk Hydro (NYSE:NHY), Occidental Petroleum (NYSE:OXY), Ocean Energy (NYSE:OEI), Oryx Energy (NYSE:ORX), Phillips Petroleum (NYSE:P), Royal Dutch Petroleum (NYSE:RD), Seagull Energy (NYSE:SGO), Sunoco (NYSE:SUN), Tosco (NYSE:TOS), TOTAL (NYSE:TOT), Triton (NYSE:OIL), and Unocal (NYSE:UCL).
For information on how to obtain a copy of this issue, see twst.com or call (212) 952 - 7433. The Wall Street Transcript does not endorse the views of any interviewee nor does it make stock recommendations. |
