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

To: Pete Young who wrote (37947)	2/22/1999 9:25:00 AM
From: JungleInvestor	Read Replies (1) \| Respond to of 95453

Happy Monday, All! Two big energy deals today: Sempra Energy to buy KN Energy, and Dominion Resources to buy Consolidated Natural Gas. These are gas deals but there surely will be more consolidation coming in oil and OSS also at these bargain basement prices. cnnfn.com I've reflected on my strategy and decided that it is wise to increase the share of my portfolio to 50% for PennzEnergy (PZE) - my favorite energy company (a cutter of capital expenditures and other costs) and decrease to 50% my OSS holdings (the cuttees), which are currently VTS, PGO and FGI. The thought is that if the low price of oil continues for an extended period of time (I don't think it will but analyst consensus of an extended glut may be correct), then an energy company has much more control over profitability through cutting discretionary costs and focusing on low cost drilling than an OSS company whose revenues are at the mercy of the energy companies. My belief is that PZE is so undervalued (per Pennzoil's proforma statements, a standalone PennzEnergy would have earned $3.33/share in 1997 and it closed Friday at 9 3/4) that it has as much potential for a huge price rise as any beaten down OSS company. PZE's earnings, announced last week, were awful, but it still had positive cash flow. The earnings included a writeoff for the cost to spin off the automotive products group and other non-recurring costs. As Douglas Fant mentioned, many energy and OSS companies are writing off all they can now to show improved earnings in the future. UPR made an $85 bid for Pennzoil in 1997 that was rejected. It is estimated that $60 of the bid was for PennzEnergy. Michael Price in a recent Worth magazine article recommended PZE as his long term pick with a $50-$60 price target in the next few years. Consolidations in the energy sector are going to continue. With such a beaten down price, it would not be surprising to see a company make another bid for PZE.