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

To: Mark who wrote (181)	4/25/1999 10:34:00 AM
From: Robert T. Quasius	Respond to of 318

I think an E&P company is damaged only if it sold off valuable prospects to raise cash, or laid off most of it's staff. If the staff is mostly intact as well as the properties containing the best prospects, then the right ingredients are in place to resume growth. Of the smallest companies I mentioned, SMIN, AXAS, MEXP, there were some sales of less prospective properties to raise cash, but these companies also used the cyclical downturn to pick up some excellent prospects as well. In the case of MEXP, a valuable property was sold to the founding Miller family, who will hold it and make it available for repurchase after the debt restructuring. SMIN and AXAS both did major acquisitions, while MEXP has many excellent prospects, and was cranking up to do a lot of highly prospective drilling. SFY just recently did a small layoff, while XTO and EVER are basically intact. XTO did create a royalty trust for one property and sold off 20% to the public. However, they were planning to do that anyway. XTO also reduced it's dividend by 75% and slowed drilling activity for 1999, in order to reduce debt. EVER has used the recent period to make acquisitions, joint venture with IFNY, etc., all of this while continuing to drill. SFY also made a major acquisition, of chalk trend properties from Sonat. PETD has continued to grow, and really hasn't slowed down a bit. It has been using it's cash to open up a whole new area for exploration in CO and MT. The news areas are higher risk than appalacia, but with potentially much higher returns. All in all, I think all of these companies are poised to either continue or restart growth with the drill bit in 1999. The only one that looks shakey to me is SMIN. SMIN will either have to sell assets, or negotiate a new line of credit, presumably with improved asset values for collateral. Their line of credit is due for adjustment in July, and the principal tranche is due in September. AXAS, despite its high leverage, hasn't run afoul of its creditors, and MEXP already has the necessary funding to emerge from the debt crisis caused by the write-downs. All the other firms I mentioned are in great shape, and have either been profitable, or break-even on an earnings basis. Anyway, in evaluating these firms one should look at cash flow first.