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

To: Crimson Ghost who wrote (41529)	4/2/1999 2:38:00 PM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

The ''Street'' is trying to play us like a cheap violin....but, ...it isn't that hard to beat 'em. To predict their future moves - just look at their past... The Funds do their ''window'' dressing buying/selling (in this case buying) prior to the 3-day setlement of month end. Anyone else notice that the buying was strongly supported right up through the month end settlement period. Then once the funds had the OSX stocks on the books; the traders turned on the juice, they dumped and the shorts leaned on us heavilly as the Street was also awaiting the OPEC compliance stats. More than anything else; the Street wants a ''sure thing'' - they wanted to know if OPEC would cut and now they want to know that OPEC is going to comply. Well the ''stats'' are out and they are contrary to all the bearish rumors - good news below ! OPEC compliance at 78% - a 10% increase over the last reporting period ! bloomberg.com This is a time to trust the numbers and to reflect on what the Street has done of late. First; the compliance issue. With a 10% increase to now 78%; the probability of OPEC disappointing in the intial reporting period of the ''new'' cuts is both illogical and improbable. OPEC's credibility is entirely riding on these intital reporting periods. While nothing is a sure thing; I think buying into these pre-reporting period selloffs (at least the first few) is a solid play. OPEC can not afford to drop the ball on these initial reporting periods and I think that it is a solid bet to buy headlong into these shakeouts on the initial pre-reporting periods. Another issue is the price of Oil. Everyone seems to now think that if we bounce off of $17 that this is somehow a negative ? The reality of the issue is that if 3 months ago we could guarantee $14, or even $15 Oil - the 'Patch would have leapt at it ! Lets not over react if we see Crude settle in to a trading range of $14-$16. IMHO that would be a very successfull enviroment, considering the estimates from where we were just mere weeks & months ago. Valuations ? ahhh yes; the important stuff... To predict the future - look to the past. The recent past of the Sept-Nov runs of late is the best ''model'' to use for valuations here presently. If we use the valuations of this period, in which we still had rampant $8-10 Crude Oil estimates and a much more unsettled Global Market and Economy then we are undervalued here presently. We now do not have the unanswered threats of Longterm Capital, Russia, Brazil, Fed Cuts and the ''big 'un'' - if OPEC would announce new additional cuts; and if so how much & how soon.... No one here is unaware of the realities of rig utilization, dayrates and earnings. But equally, no one is unaware that the Street bases todays shareprices on the far forward looking expectations of Oilprices and its effect on Cap Ex spending, utilization, dayrates and finally earnings. The last remaining hurdle imho; is the Streets confidence in OPEC adhering to the proposed cuts. With this recent upside surprise in OPEC's last reporting period prior to the new cuts, we surely can support valuations much higher than we find ourselves at presently. Does anyone really think that OSX 72-78 is overly optimistic given the present price levels of Crude Oil & Natural Gas and the overall enviroment as opposed to last fall ? I think we just saw our shakeout and this positive OPEC compliance news will be the base of backing & filling and a new leg upward to OSX 72-78 ish, with perhaps OSX 85ish as a not overly optimistic resistance level. If OPEC does comply to the new proposed cuts, the upside from here imho, is substantial. Many analysts are predicting that the 2nd half 1999 will be the period of renewal. At that time the Intnl Oil Majors and Independants will have seen the degree of OPEC compliance and if Crude prices are stabilized above $14,15, or even $16. If so, most predict a steady recovery in utilization and dayrates. When we begin to see utilization increase and as dayrates rise, I think we may see OSX 100 by late fall. The expected demand for shallow water GOM rigs for the natural gas market is growing daily. I think that most of us also completely understand the downgrade/upgrade game . Nationsbank Montgomery's downgrade just preceeded the release of the OPEC compliance stats and was into the face of post end of the quarter window dressing - buying; and was set up as a momenteum oriented downdraft - which imho, positions the Institutional buyers to get back in on the cheap, ''after'' they see OPEC's compliance numbers. As such; I see a nice move upward starting Monday and heading into Earnings reporting in mid-late April. Addidtionally; we should also have learned through repetition that the Street will also most likely sell off the OSX stocks just prior to the heart of the reporting periods. A solid play has been to be out of the companies/stocks that are initially reporting and to buy stocks like FGI on the initial sector downdrafts - as they traditionally report late in the cycle and the ''negative'' effect has usually disappated by the time they report; and their usual positive reports of late triggers a predicatable updraft and potential profit taking period for trading. Once again; the Streets predictability of late allows a multitude of opportunities during earnings season. Earnings of course, follow the increases in utilization and dayrates and Q1 &2 2000 are setting up to be the first period of substantial year over year earnings increases. This may be the final recovery period to business as ''usual' and OSX 100 - 120 with supporting crude prices of $16 -18 looks possible. With the summer driving season just around the corner, coupled with numerous refinery outages and if we continue to see positive OPEC compliance - it could be setting up as a potential ''To the Moon Alice'' ride for the OSX from its level of the mid 60's here.... a 40-60% rise in the OSX by year end is not only possible, but entirely probable imho. PS - don't forget that at least one part of the Oilpatch is putting cash into the register today off of higher Crude & Natural Gas prices ! The E&P's and Integrated Oils do not have to wait for higher dayrates and utilization - they get to pocket the price increases at the ''pump'' today - not a bad move to diversify to get some exposure in these sectors... good luck