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Gold/Mining/Energy : Strictly: Oil and Gas Exploration Companies -- Ignore unavailable to you. Want to Upgrade?

To: Robert T. Quasius who wrote (172)	4/24/1999 3:05:00 PM
From: Mark	Read Replies (1) \| Respond to of 318

RTQ - You have made a number of very valid points (as usual!) but haven't really answered my question. Perhaps I can explain it better. I assume that we are in broad agreement that the recent low commodity pricing has damaged this industry. Furthermore, that this damage will manifest itself in a number of ways for different companies - i.e. from a temporary slowing of growth (minor) through to bankruptcy (major). I am further assuming that we agree that when a company dies, it takes a long time from the roots of it's downfall being planted until it actually folds. Furthermore, whilst most companies won't die, they will have been damaged, and that the periods of recovery for many will be extremely long. So, my question is based on the simple assumption that whilst we are all capable of spotting some good buys here (on which we have broad agreement), we should also be able to spot some companies that we should be avoiding. In the absence of this "losers list", I am concerned that all of our "great buys" are in part being buoyed-up by general euphoria; i.e. we haven't yet got a completely clear picture. A particular concern is that whilst many of these companies have had positive cash flows for most of this down-turn (which still has to be proven completely because we haven't yet had all the results for what has probably been the worst quarter), how much of this has been caused by damaging cut-backs in expenditure ? Another way to state this is that certain industry commentators are suggesting that we have an NG shortage looming because of all the cut backs in drilling. (The rig counts give hard evidence that there has been substantial cut-backs). So, we all seem to be accepting that the industry overall has been damaged, and yet I don't see any discussion about which companies are bearing the brunt of this - and why our pet favourites have escaped? In a net-zero game, presumably we cannot be confident about spotting the winners if we can't also be confident about spotting losers! I am not sure that I have expressed this brilliantly well. Furthermore, I have directed this question at you not because I think you are being unduly enthusiastic, but simply because I think you may be able to help me find the answer. FWIW - I suspect that the companies who have had the most cash rich positions are likely to benefit the most. This is because they have the financial resources to drill now (when most other companies do not) and because it has probably been good management has got them in this position. These companies may therefore show the most future growth. This doesn't mean to say that these stocks will show the best price appreciation in the short/medium term, just that they could make the best long term investments. Since I know that you like "The Intelligent Investor", I'd have to ask why speculate in recovery plays when the current situation seems to provide so many low risk investment opportunities? Check your last post to see how many times you talk about "survival", "refinancing", "loans" etc., :) We agree on PETD - a growth stock with no debt and selling below book value, (in fact, not far off current asset value!) I just wish I could find more like this, though probably a bit bigger. Mark