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

To: Mike from La. who wrote (37549)	2/14/1999 3:40:00 PM
From: Crimson Ghost	Read Replies (1) \| Respond to of 95453

Top Financial News Sun, 14 Feb 1999, 3:22pm EST Canadian Oilfield-Service Shareholders Seen Coming Up Dry on Investments Canada Oilfield-Service Investors May Come Up Dry: Taking Stock Calgary, Alberta, Feb. 14 (Bloomberg) -- Last year wasn't kind to companies that drill and service wells and supply Canada's petroleum industry, and many analysts say the problems will last through 1999. In the past year, stocks of oilfield-services have lost more than half their value, reflecting exploration and development cutbacks by producers plagued by oil prices near 12- year lows. Since the service companies depend on the producers that hire them, there's little hope for a recovery until the price of oil moves up. ''There's more pain to come in 1999,'' said John McAleer, an analyst at FirstEnergy Capital Corp. in Calgary. Since reaching a record high on Oct. 10, 1997, the Toronto Stock Exchange's oil and gas services index has dropped 70 percent, putting it at its lowest since April 1996. The drop matches the industry's profit freefall. Earnings at Canada's two largest drilling companies, Precision Drilling Corp. and Ensign Resource Service Group Inc., have plunged. Precision's fiscal second-quarter profit dropped a 71 percent drop on a 33 percent decline in revenue. Ensign fared just as poorly in its latest quarter. Making It Clear A look at petroleum producers' budgets makes it clear why the bad times are likely to last. The amount that Canadian petroleum companies will spend on drilling this year is forecast to fall 18 percent to C$14.5 billion (US$9.72 billion) this year from C$17.5 billion in 1998, according to FirstEnergy, a Calgary, Alberta-based firm that covers the energy industry. That's 51 percent less than 1997's C$29.5 billion. FirstEnergy expects the number of wells drilled this year to drop 17 percent to 8,400 from 10,093 last year, and less than half 1997's 17,003. The forecast is based on oil prices averaging US$15 a barrel in 1999, or 4 percent more than the US$14.40 they averaged in 1998. Oil has averaged US$12.36 so far this year, down from US$20.29 in October 1997. Natural Gas Natural gas, which was expected to provide producers with some relief from low oil prices, hasn't come through. Many forecasters predicted a cold season after last year's warmer- than-usual El Nino winter. So far this year, however, the weather in North America has again been unusually been mild, keeping gas prices relatively low. Natural gas prices on the New York Mercantile Exchange have averaged US$2 for each million British thermal units since the beginning of November. In the 12 months from November 1997 to the end of October 1998, also an unusually mild year, gas averaged US$2.25. ''We don't think there is going to be any quick turnaround,'' said Dale Tremblay,'' chief financial officer at Precision Drilling. ''1999 is going to be a difficult year.'' Finally, there's little chance of an acquisitions wave setting a fire under share prices. Tremblay said Precision, which has been one of the more active buyers over the past few years, is steering clear of acquisitions because it thinks it's more useful to focus on running its business efficiently to cope with current conditions. ©1999 Bloomberg, LP. All rights reserved. Terms of Service and Trademarks.

To: Mike from La. who wrote (37549)	2/14/1999 9:40:00 PM
From: JungleInvestor	Respond to of 95453

My understanding is that oil depletes an average of 3% per year. Growth in oil demand is estimated to be little more than 1% in 1999. This means that it will take a minimum of 4% supply increase this year to stay even (of course we have the "inventory glut" to work off - but who knows how much this really is worldwide because only the US figures are reliable. The US oil inventories are only a few measly percentage points higher than this time last year). In this equation, throw in all of the shut down stripper wells and the huge capex reductions which are actually reducing supply (stripper wells reduce permanently). Next year as the world economy cranks up to full speed, the oil demand may be up to normal 3% growth, which means it will take a supply increase of 6% to stay even. My guess is that the supply/demand imbalance pendulum will swing in the other direction sooner rather than later. CNN shows some pretty cold weather in the midwest and northeast, at a time when refiners are switching over to gasoline. Wonder if Tuesday's API report will show a drawdown in distillates? The first sign of a change in the pendulum could happen if the La Nina effect really occurs(i.e., longer winter, much colder at end).