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

To: gpphantom who wrote (40905)	3/26/1999 8:05:00 AM
From: kendall harmon	Read Replies (1) \| Respond to of 95453

Important Reuters story on the sector this morning: Friday March 26, 7:03 am Eastern Time Oilfield stocks rally, profit rebound seen distant By Andrew Kelly HOUSTON, March 26 (Reuters) - Oilfield service stocks, a notoriously volatile group, have rallied strongly in March on the strength of OPEC's deal to curb output and support oil prices. Compliance by OPEC members in implementing the cuts will now be a key factor in determining whether the rally continues or fizzles out, analysts who follow the sector said. ''In order to maintain the momentum, we need to see OPEC compliance and some kind of turnaround in the Asian economies,'' said Andreas Vietor, an analyst with Hanifen Imhoff Inc. Ultimately investors will also want to see evidence that oil and gas companies have regained their confidence and are willing to boost their spending on exploration and production, he said. So far this year, the Philadelphia Stock Exchange index of oilfield service and drilling stocks has risen some 26 percent after slumping 55 percent in 1998. Stock of service firms Schlumberger (NYSE:SLB - news) and Baker Hughes (NYSE:BHI - news) has risen 26 and 29 percent, respectively, so far this year while drillers Global Marine (NYSE:GLM - news) and Noble (NYSE:NE - news) have posted advances of 20 and 36 percent, respectively. Oilfield service stocks are far more volatile and sensitive to shifts in the price of oil than the companies that they help to locate and produce hydrocarbons. In fact, the price of crude is up about 30 percent from end-1998 levels, while the Standard & Poor's index of international oil stocks has risen less than 2 percent. Analysts note that rallies in oilfield service stocks are driven by anticipation of an actual recovery in earnings that is often many months away, if it indeed materializes. First-quarter earnings are generally expected to be lower that in the same period last year. In a recent research note, Simmons & Co analyst Dan Pickering said the current rally was the fourth in the last six months to be triggered by a firming of oil prices. The previous rallies brought average gains of over 50 percent but were followed by sharp retreats in less than a month. Prices for the U.S. benchmark West Texas light crude oil slumped to a low of almost $10 a barrel in late 1998 after trading for around $20 for much of 1997. Since this month's deal by major OPEC and non-OPEC producers to cut production by 2.1 million barrels a day, prices have settled in a range of $15 to $16. Vietor said that if prices remained around current levels, that could lead to increased activity by oil companies in about six months and the beginnings of a recovery in earnings for oilfield service companies by the third or fourth quarter. David Herasimchuk, vice president of business development for offshore driller Global Marine Inc., says recovery for his company was likely to be a lengthy process, even if OPEC's efforts push the price of crude oil back into the high teens. ''If they are successful at that, our business will turn around. It may take a year or more from today, but it will be heading in the right direction,'' he said. Oil companies would want to see evidence of an enduring recovery in oil prices and cash flow, he said, before committing themselves to fresh efforts to replace and expand reserves. Vietor likened investment in oilfield service stocks to a lottery based on expectations about oil prices. ''If you wait until things materialize too much, you will miss it...You have to hold your nose and jump in,'' he said. The following table shows analysts' consensus estimates of earnings per share for selected oilfield services and contract drilling firms, as compiled by First Call Corp. COMPANY Q1 99 Q1 98 Schlumberger (NYSE:SLB - news) $0.35 $0.67 Halliburton (NYSE:HAL - news) $0.23 $0.46 Diamond Offshore (NYSE:DO - news) $0.38 $0.56 Transocean Offshore (NYSE:RIG - news) $0.71 $0.63 Baker Hughes (NYSE:BHI - news) $0.12 $0.35 Noble Drilling (NYSE:NE - news) $0.19 $0.35 Weatherford (NYSE:WFT - news) $0.11 $0.63 Global Marine (NYSE:GLM - news) $0.20 $0.39