Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : ABC - Abacan Resources, Nigerian Oil $$$ -- Ignore unavailable to you. Want to Upgrade?

To: pete meyer who wrote (2816)	5/18/1999 9:03:00 PM
From: FoxyLoxy	Read Replies (2) \| Respond to of 3156

Well, rather than give names, I will tell you my approach as of late (couple of months ago). I suspected we were in for a run on oil, so I watched crude daily. I also had looked at companies that had really suffered from the oil downturn. Companies with decent production volumes but low margins, low margins as a result of pricing, rather than higher than standard operating costs. These companies would participate most quickly and directly from oil price moves. Netbacks are the most important financial number I know of in the oilpatch...I prefer to focus on field netbacks. (revenue less direct operating costs = field netbacks.....revenue less direct operating costs less g&A less interest = netbacks) Run your numbers with two columns: one column for actual costs, the other for the per barrel amounts. (Convert gas at the local price conversion rather than at what we do in the US. eg. Canada is 10 to 1) The per barrel figure is key for comparisons. So, basically I looked for areas of high operating costs....the North Sea is what I picked. There are some very good operators there(they have to be). Their stocks had been pummeled. There are some North American companies with good exposure to the North Sea - I chose them for obvious reasons. As you can imagine, improvements in the price of oil has a huge impact (immediately) to them. From there, you just need to pick a good company, one with good production levels and operations and play the waiting game.......then, when oil moved, I jumped in. In the end, you could have made 50%+ on most all "real" oil and gas companies. Movements upwards in crude first impacted the more senior stocks, then the juniors. So you can actually "shift gears", which I did. I am sure others did also. (On the way down, it is juniors first, seniors last.) I believe many people made good money just being near the action. Any companies that did not have real operations did not participate. Be sure you have an eye on "real operating companies". I think the key is knowing what drives a successful oil and gas company. The numbers are just the culmination of the hard work of an entire company. Oil and gas companies need excellent team work, there is just so much to do right to win. The industry is so competitive. Look for good teams with management that appreciate the efforts of their team. Sounds hokey, but in the end it is always true. I have found that a good team can perform with poor assets, but a poor team cannot perform with good assets. Good teams with good assets are what you look for. FoxyLoxy