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

To: upanddown who wrote (42413)	4/16/1999 5:32:00 PM
From: JungleInvestor	Respond to of 95453

John, I fully agree - PZE is a favorite of mine (second largest position in my portfolio after SEV) plus several weeks ago I picked up some 12 1/2 October calls on the cheap. I wouldn't write off their international operations as crappy, however. They have a 5% interest in a 5 billion bbl estimated reserves in Azerbajian, a new joint venture with Petrobras in Brazil (offshore) and a lot of acreage in Egypt (where APA has done very well). They don't have enough cash flow currently to develop their international properties (I think they are only spending $18 million on international out of a $250 million capital budget). Their domestic properties also look very good. They have a new joint venture with SONAT to develop a huge 1 to 4 trillion cubic feet methane coal bed in New Mexico (which would more than double their gas reserves). Their Gulf of Mexico properties also looks great - per a poster who works for PZE the High Island 156 is currently drilling and it looks good on seismic and he says that Garden Banks 161 will put at least 20,000 BOPD on line October 1. What intrigues me about PZE (and SEV) is the turnaround situation. Their entire management team (operational VP's and President) came on board in 1997 (except one in 1998). They are now focused on solely E&P since they spun off their automotive products 12/31/98. Their low cash flow is due to low oil prices. Their proforma earnings for 1997 was estimated to be $3.33 as a stand-alone E&P company and their average price of oil in 1997 was $16.30 (versus $9.22 average oil price in 1998 when they had the big loss). One negative factor currently is that PZE has significant gas revenues (more than half I believe) and gas prices are very low. However, the outlook for gas prices later on in the year is very good. PZE is much leaner now than in 1997. I expect to see them significantly beating consensus earnings for the first quarter (although still a loss) due to the increase in oil price and positive earnings in the second quarter (assuming oil prices stay up). You mentioned the 7.1 million shares of CHV stock they own. This is convertible to offset LT debt of an equal amount.