Energy, Energy Service, Natural Gas &amp; Oil Sectors

Top 590. Jul 20, 2001 5:51 AM

» lcha - Re: NG & Oil Watch List & Indices

In response to message posted by JenL_2:

Great charts Jen. Thanks. I'll take 0% return over -50% any day.

It's painful to hear obviously older folks on the Houston financial radio talk shows describe their tech losses. They got caught up in the Wall Street marketing machine and are really just now fully comprehending the damage done to their retirement plans. For these people taking their lumps and starting over is not an option.

-- posted by lcha

http://www.thestreet.com/funds/chrisedmo...

Top 591. Jul 20, 2001 8:51 AM

» Rande - Evidently, the analysts aren't the only ones who lie.

Evidently, the analysts aren't the only ones who lie....

Insider Selling by Enron Execs Speaks Louder Than Their Words

At Enron (ENE:NYSE - news - commentary), actions are speaking differently than words.

At the same time as Enron Chairman Ken Lay and Enron President and CEO Jeff Skilling were touting their company's stock as undervalued, both were in the process of selling hundreds of thousands of shares.

In an exclusive interview with TheStreet.com last November, Lay suggested that Enron stock -- then trading in the mid-$70s at nearly 50 times earnings -- was undervalued. "Comfortable that it's worth that [50 times earnings], yes," he said. "As a matter of fact, some of us here and, of course, many analysts would maintain that even that is undervaluing the company."

Yet, since the beginning of the year, Lay has simultaneously exercised and sold nearly 400,000 shares, continuing a program of exercising options and selling the shares that dates back to last November. This year's sales were all at prices below the November prices at which he said the shares were undervalued. According to data compiled by Thomson Financial/First Call, Lay's options transactions occurred between $52.95 and $82 a share.

In February, Lay stepped down as Enron's CEO, retaining the title of chairman.

Skilling's words and actions were similar. During a January analysts and investors meeting in Houston, Skilling said he believed Enron stock was worth $126 a share. At the same time, he was in the middle of completing sales of 130,000 shares of Enron stock he registered in November 2000. Since January, Skilling has registered for sale an additional 270,000 shares of Enron. And since the first of the year, he has sold stock at between $52.95 and $80.57 a share.

Both Lay and Skilling still hold large positions in Enron. As of May 30, Lay and his family reportedly owned more than 2.66 million shares, and Skilling controlled more than 1.1 million shares. They each acquired more than 100,000 shares from the company in January.

Enron spokesperson Mark Palmer says the sales are "program sales" that involve the exercise of expiring options and the sale of stock to cover the costs and tax liability, a common practice among executives at many major corporations.

And, Palmer notes that Enron's compensation makes such sales almost routine. "A very significant portion of senior management's compensation is paid in equity," he says.

Mixed Messages

Analysts and investors worry about the messages such high-level insider sales send, especially when at the same time executives are touting the stock's appealing value. "Certainly, it's a concern to see the chief executive selling so aggressively," says Jeff Dietert, an analyst at Simmons & Co., a Houston energy investment boutique and a member of the TSC Energy Roundtable. "Especially when they are saying the stock is undervalued. That sends a very mixed message to investors."

While acknowledging Enron's unique equity-based compensation program, Dietert says recent selling at the top is unique. "You constantly see a regular group of people selling as they monetize their compensation" at Enron, he says. "However, the larger sales from senior executives are different. Sales have been weighted much more heavily to Lay and Skilling than they have been in the past."

Dietert's 12-month price for Enron is $58, and his firm has not provided banking services to Enron. Simmons does not rate companies.

Another analyst who asked not to be named was more critical. "The [insider sales] are disconcerting to say the least. In a market like this where the slightest indication of lack of confidence sends a stock down precipitously, their actions are speaking louder than their words."

Dream vs. Reality

One reason for the mixed messages may have been the company's belief in broadband. At the time Skilling made his now famous $126 tout, he indicated that nearly $40 of value would come from Enron's now flailing broadband business. As my colleagues Adam Lashinsky and Peter Eavis have aptly chronicled, Enron's great dream for broadband turned into a nightmare.

"The world certainly looks a lot different today than it did in January, especially to Enron," says Tom McIntyre, president of Dessauer & McIntyre Asset Management, a Massachusetts-based investment adviser. "You sure don't see projections from anyone assigning value to broadband now." In fact, on Enron's second-quarter earnings call, Skilling lamented the fact that investors seem to be assigning negative value to the company's telecom operations. McIntyre holds a long position in Enron.

Still, investors might have expected Skilling's words to be backed by his actions. When he made the bullish comments in January, Skilling was selling stock even though the shares were trading near $80 a share, a 57% discount to his target price. That led the analyst to quip, "If it's not an expensive stock, why are they out there selling it?"

To others, however, the sales are just noise that distracts from a solid growth story. "You would prefer it if they would never sell," says McIntyre. "I'd rather watch them hold the shares like I do. However, [Skilling] still owns well over a million shares, and the consistent sales suggest they have a program to sell whether the stock is near its high or at its lows." (Records show that Skilling has been selling 10,000 shares each week since mid-November.)

The two executives "have a long record of creating and sustaining value for shareholders. I have a high level of confidence that Skilling can continue that record," McIntyre said.

But appearances count. "It's a question of perceptions," says McIntyre. "In this market, anything can get a company, and the insider-sales news does hurt."

That's especially true when actions and words don't mesh. As the analyst quipped, "It's what they call an oxymoron. You are saying one thing and doing another."

-- posted by Rande

Top 592. Jul 20, 2001 11:50 AM

» lcha - Re: Evidently, the analysts aren't the only ones who lie.

In response to message posted by Rande:

Maybe being courted by Bubba in cell block 3 is not such a bad option after all for these guys.

-- posted by lcha

Top 593. Jul 20, 2001 11:56 AM

» Rande - Re: Re: Evidently, the analysts aren't the only ones who lie.

In response to message posted by lcha:

To be fair, a systematic option exercise strategy that involves regular sales is par for the executive course in any industry. In order to conform with SEC Rule 10b5-1 regarding insider transactions, most senior execs have a written plan in place which they follow for regular sales. Provided it's in good faith, the plan can be deviated from so long as there is no nonpublic information of a material nature available at the time the trading decision is made. Could just be a case of unfortunate timing of comments made on relative valuation prior to the realization that they were wrong.

-- posted by Rande

Top 594. Jul 20, 2001 4:58 PM

» lcha - Re: Re: Re: Evidently, the analysts aren't the only ones who li

In response to message posted by Rande:

There's nothing wrong with exercising of the options in and of itself. There's nothing wrong with corporate officers touting their company's stock in and of itself.

Touting your stock AND selling shares leaves you open to suspicion. If you're actively selling your companies stock, just shut up.

-- posted by lcha

Top 595. Jul 20, 2001 5:08 PM

» Rande - Re: Re: Re: Re: Evidently, the analysts aren't the only ones wh

In response to message posted by lcha:

No argument here. Expecially when the "regular sales" are accelerated right after making positive public statements.

-- posted by Rande

Top 596. Jul 21, 2001 5:26 AM

» tele - Get Ready For Higher Prices

OPEC says it will cut production if oil falls to 22 a barrel. The price has dropped 3.50 a barrel in the last 10 days (yes here we are seeing that reflected in the price at the pumps - paid 1.33 yesterday as opposed to 1.45 at the same station two weeks ago).

-- posted by tele

Top 597. Jul 21, 2001 7:05 AM

» R_Lewis - Re: Get Ready For Higher Prices

In response to message posted by tele:
They better hurry to raise the price to 3.00 that they predicted in CA, summers half over.

Richard

-- posted by R_Lewis

Analysts Get Giddy About Oil Amid Talk of OPEC Cuts

Top 598. Jul 24, 2001 6:44 AM

» JenL_3 - Near-Term Oil Rally?

This from 7/23 TSC:

By Dan Bernstein

It's not easy to see through crude oil, but a couple of analysts think they may be looking at a near-term bottom in the petroleum sector.

For the past two months, oil and oil-related stocks have been on a steep downward trend as demand for oil and gas deteriorated. On Friday morning, reports out of two analysts described how the events of the last quarter set the stage for a near-term rally in the oil and gas sectors.

UBS Warburg's James Stone upgraded Halliburton (HAL:NYSE), BJ Services (BJS:NYSE) and Ensco International (ESV:NYSE) to buy from hold, largely based on valuation, indicating that the sharp selloff in oil stocks over the second quarter of 2001 was overdone. Tyler Dann, an oil analyst for Banc of America Securities, approached the sector from another angle, issuing a note discussing the likelihood that OPEC will cut production before its next scheduled meeting. Published reports are now surfacing that ministers from the oil producing nations will lower output in the next 10 days.

Stone's move, in part, might clear his conscience. He recommended oilfield services stocks last quarter, and now refers to that as a "blown call." The Philadelphia Stock Exchange Oilfield Services Index has dropped 32.5% since May 21. The Amex Oil & Gas Index has fallen 12.2% during the same period, and the Dow Jones Oil & Gas Index has lost 14.4% in that time.

Along with the upgrades, Stone maintained his strong buy ratings on Baker Hughes (BHI:NYSE), Cooper Cameron (CAM:NYSE), Weatherford International (WFT:NYSE), Nabors Industries (NBR:NYSE), Noble Drilling (NE:NYSE), Precision Drilling (PDS:NYSE) and Trico Marine (TMAR:Nasdaq). Each of those have gained strong ground since the note was published Friday morning.

Dann, in a research note Friday, speculated that there's about a 70% chance of an OPEC production cut before the group's next meeting on Sept. 26. He recommended ExxonMobil (XOM:NYSE), Chevron (CHV:NYSE) and Phillips Petroleum (P:NYSE).

Crude oil prices have fallen 15.4% since May 21, and natural gas and unleaded gas prices have slid as well. "The OPEC basket [of petroleum commodities] is currently at $22.64 [per barrel], near the low end of the $22/B - $28/B targeted price band," Dann pointed out.

For his part, Stone wrote that one catalyst for a near-term rally would be "oil prices surging back toward $30 on the back of an OPEC cut."

<img SRC="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
Oil Stocks 1 YR Chart

<img SRC="http://pvcharts.quicken.com/bin/icenter...." WIDTH=470 HEIGHT=250>
Oil & NG Sector ETFs vs DJIA, S&P500 & Nasdaq

.....Jen

-- posted by JenL_3