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

To: The Ox who wrote (43070)	4/23/1999 12:53:00 AM
From: Captain James T. Kirk	Respond to of 95453

US: Stockpile Oil for Y2K Reuters 2:30 p.m. 22.Apr.99.PDT WASHINGTON -- Homeowners should fill their heating-oil tanks sometime before New Year's Day, just in case computer problems disrupt petroleum supplies, a US government energy official said on Thursday. Robert Kripowicz, deputy assistant for fossil fuels at the Department of Energy, told a Senate committee that he was cautiously optimistic there won't be any disruptions in the nation's oil supplies because of the millennium bug. Still, he said households and businesses ought to have a backup fuel plan, just in case. "While we see no cause for panic or alarm at this point, consumers who are dependent on oil should always be prudent in planning for their heating requirements, and should not wait until the last minute to fill their home heating oil tanks," Kripowicz said. -------------------------------------------------------------------------------- Read ongoing Y2K Coverage -------------------------------------------------------------------------------- "Similarly, power generators and large industrial consumers may want to purchase some additional [petroleum] inventory well in advance of the year-end as a contingency or hedge against prices," he added. However, a US Coast Guard official testifying at the Senate hearing said the public should be cautioned not to hoard petroleum products or fill tanks a day or two before New Year's Day, because that could disrupt energy supplies. "We understand that that act alone, repeated nationwide, could lead to shortages," said Rear Admiral George Naccara. He said the Coast Guard was assessing the computer readiness of 50 key international ports. The American Petroleum Institute said a survey of 1,000 oil and natural gas companies showed that 94 percent will have their computers upgraded by 30 September. "The oil and gas industry is working intensively to prepare for the year 2000 and feels it will be ready to supply our customers at that time," API president Red Cavaney told the committee. Kripowicz said while American oil companies were addressing their computer problems, it was unclear how well foreign oil companies -- or the infrastructure on which they depend, such as electric power, telecommunications, ports, and shipping -- were prepared. "A failure of any of these systems could affect the oil industry's ability to operate," he warned. The United States depended on foreign oil imports last year for 56 percent of its petroleum supply, according to the Energy Department. Kripowicz said the four largest suppliers of imported oil to the United States -- Saudi Arabia, Venezuela, Mexico, and Canada -- were converting their computer systems and expect their petroleum industries to be fully prepared by the end of the year. If there are disruptions in US oil supplies, however, Kripowicz said the DOE is prepared to sell oil from the nation's strategic petroleum reserve in order to "calm the market." The reserve, stored in underground salt caverns in Texas and Louisiana, carries 561 million barrels of oil that could be removed at a rate of 4.1 million barrels per day, he said. Copyright© 1999 Reuters Limited.

To: The Ox who wrote (43070)	4/23/1999 1:52:00 PM
From: SliderOnTheBlack	Read Replies (2) \| Respond to of 95453

Micheael H - ?. - & is anyone else sensing a subsector change ? <<My impression is; and remains - that the market went up; due to the anticipated rise in dayrates and utilization going forward (6 months out). If dayrates did change overnight, and oil changed overnight, why wouldn't stock prices change overnight ? - the answer I feel; is that Oil moves first, stock prices second, and dayrates & utilization 3rd; in a recovery - keyword being a recovery ! In a decline; oil prices fall 1st, rig utilization & dayrates fall 2nd, and lastly stock prices fall... just my opinion. >> Michael; ??? Obviously - the price of Oil did move here first - then secondly the stocks moved from OSX 45 to OSx 72-5ish here on the ultimate expectations of better utilization, dayrates & overall fundamentals. And #3 - the utilization & dayrates will follow... I'd say those comments are right on the money... that is exactly what happened here. The only ''unknown'' factor is ''when'' we will see the actual fundamentals for Oilpatch companies improve and how will the Street react to the timeframes involved ... Presently, we are in a ''timeframe'' correction - as the Street must make up its mind as to how much additional value they will assign these stocks, or if they are willing to support these valuations - given present fundamentals and the fact that virtually all of the CEO's of late have just warned them to move back their timeframes being used untill the sector actually sees higher rig utilization, dayrates, new orders and better earnings. The positive expectations are there - it is just a ''timefactor of money'' valuation call here now... This is precisely why I will continue to take profits on most OSX stocks as we stair step up to new highs. I just see too many rotation ideas still available that have worked very well for me. It will get more difficult if we move to OSX 85ish here - say off of the OPEC compliance news - and if the laggard list starts disappearing, then this rather easy game of late, may get much more difficult. At OSX 85ish - if Companies are still warning that nothing fundamental is improving - then I would take substantial profits and sit in E&P's allmost totally. I would be very uncomforatable in most stocks at OSX 85ish levels nearterm without some more good news on additional rigs going to work and some new contracts being awarded. Again, the E&P's are putting the numbers on the bottomline as we speak from this pop in Oil prices. They don't need to wait for anything to improve and they also benefit from lower drilling costs - a win-win scenario... We have a pretty well defined series of events controlling our future in the OSX imho: OPEC compliance reports Sustainability of Crude Prices Rig Count/Utilization Day Rates New orders/backlog maintenace-growth Cap Ex spending increases from the Intnl Oil Majors & Independants Quite simply - the Street has to decide here - how much higher, if at all; they are willing to move these stocks based soley on future expectations of the fundamentals improving. The continual warnings of CEO's here for them to move back their timeframe expectations of when rig utilization, dayrates and new orders will improve is not good news, but it isn't really bad news either - it's neutral... and that is where we are sectorwise - nothing terrible looming to take us all the way back down - highly unlikely we give up all of our gains like the last 4 runs; but also highly unlikely that there is anything in the next month, or two to drive us significantly higher. - a yellow flag enviroment. Given the huge volume on our initial spike here - I would think that if the hedge funds & shorts decide to lay it on here - that soley the imbalance of sellers to buyers could artificially give us a moderate correction here. Maybe 10-15 points ? - Without any unforseen changes in Oil prices, I would expect buying support to step in in the low to mid OSX 60's immediately. Some individual stocks look a little pricey to me, but OSX 62-77 looks like a fair trading range given Oil prices holding very, very well and the present fundamentals. Nothing much to take it much higher neartern, nothing much to take it much lower... The money to be made nearterm is in the laggards and especially in the micro-cap E&P's which were decimated of late - many are still at much better fundamental valuations than even the driller & service laggards. PS - again, I am NOT spreading gloom & doom (market neutral !) - but how in the hell can anyone get excited about VRC's CEO's comments here: <<in discussing the first quarter results,... Varco has been particularly affected by declining offshore rig utilization and a steep drop in the dayrates for those rigs. The result has been less upgrading of existing rigs and an absence of new rig construction -- the two main factors behind the growth in our business over the past three years.>> Revenues for Q1 1999 - $72.3 M vs. $299.6 M last yr Q1 Backlog for Q1 1999 - $$272 M vs. $$397 in Dec '98 and $599 M last year Q1 ..... this is devastating. While VRC has a solid balance sheet and will obviously survive - it will be quite some time untill they can build backlog to even come close to the 1997-8 run earningswise. I think we may be fooling ourselves thinking that VRC can produce earnings within 12 months to support anywhere near their valuations of last year. The problem here is that some industry pundits are now saying that this was a virtual ''blip'' - in that it was a historic boom in Deepwater Rig Building and that the sustainability (that damn word again) of Deepwater Rig Construction given the stance of the Intnl Oil Majors and their conservative Cap Ex spending - that they may never see those kinds of numbers again. That is part of the reason that FGI languishes here with little major Institutional buying support. On its earnings alone here - FGI should be a $30 stock today ! - it isn't because the Street doesn't think FGI will ''ever'' have that type of growth & revenue again... It doesn't matter what ''we'' think many times, but rather how we react to how the ''Street'' thinks - is what determines if we make money, or not. Initially I could not believe how the Street was not giving FGI adequate value here. They have a huge backlog, allmost assured earnings through all of 1999 and sell at a steep discount to many other Oilpatch companies. The reason has been slowly pounded home to me - the Street does not believe that the FGI's & VRC's will near - mid term, or even perhaps ''ever'' see the type of numbers they saw in 1997-8. So why fight the Street ? - You can't beat them, we can not force them to move FGI to $30 here. So why not determine what subsectors and individual companies they do like ? CDIS & DRQ are 2 prime examples here - they are enjoying rich valuations here. Also, on our major corrections - the Drillers ramp strongly off of the bottoms, Companies like ESV RDC DO NE have such near ''overnight'' potential via rapid turnarounds in rig utilization & dayrates that their earnings can ramp much quicker than the manufacturing & major equipment companies. - especially the Deepwater Rig companies. Untill something changes, I do not think that FGI and VRC will outperform the sector here... there are just beginning to be better choices... The Street is talking about BJS & BHI as 2 companies that are early stage beneficiaries of the initial recovery in the Oilpatch - buying these companies on dips/retracements - as well as the other subsectors & companies that the Street has tipped its hand on, may be the ticket here. While a rising tide will indeed lift all Oilpatch boats - being in the right companies and being a good stockpicker will give superior returns in this recovery. We seem to be transitioning from different subsectors value-wise than we had in the 1997-98 run imho.... this is another area where being ''right'' will be very profitable... I am changing my thinking away from the FGI's & VRC's here - to other companies. This is also why RIG is not getting full value imho - RIG has nearly 50% higher earnings all through 1999 than DO - but is actually cheaper ? - they are both drillers, so why the difference ? I've beat my brains out (profitably so at least) by trading RIG - just ''knowing'' it would ramp over and above DO - but not so far. Finally, the more I read & research here; I am beginning to see and realize that the Street is shifting its valuations and that I may not see RIG surpass DO anytime in the near future. RIG is viewed as being locked into longterm inflexible Deepwater Contracts which are good for 1999 earnings support, but they will not benefit from DO's high upside to a much greater exposure to jack ups and shallow water - which has much higher dayrate upside than does deepwater nearterm. So evidently, the Street now views RIG's former strength as a weakness and DO's former weakness - is now a strength - because their earnings have much greater upside potential than RIG - who is substantially locked in through 2000... go figure... Just when we thought we knew what they liked - ie: deepwater, deepwater, deepwater... they jump on shallow water (VBG) ! - but, in reality - doesn't it make perfect sense ? - the Street is forcing us to think outside the box and well ahead here... Somethimes things are not what they seem - a key thought here is that the Street is definitely ''rotating'' ideawise on their valuations of individual companies and subsectors. Given the Transition of the Oil Markets - I guess that makes perfect sense... again, being right here will be very, very profitable... Maybe the drillers with the highest jack up & shallow water leverage are the picks in the drillers now - and not deepwater ? Maybe PDE & FLC will be the best returns in the Oilpatch in 1999-2000 ? Maybe the Service companies that are heavilly weighted to Deepwater Rigs are no longer the ''hot'' sector - and maybe more traditional Oilpatch service & equipment mfgs will be the ''hot'' ticket. BJS vs. FGI ?? who knows... there seems to be a transition imho... comments ?