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

Top 690. Sep 7, 2001 5:51 AM

» lcha - Re: Energy Funds

In response to message posted by JenL_2:

Great chart Jen. If you look at the holdings, Vanguard is the most conservative and Invesco is the most aggressive. The year to date returns in this down year reflect that. I have owned the Invesco Energy fund since 1998 and have not sold any shares.

I have set my investment limit in the energy sector to 10% of my portfolio. I still have 2.5% to play with and, given the energy values available today, I will be investing the remaining 2.5% over the next 2 months.

I still believe that Energy will outperform the S&P,NAZ,DOW and NYSE over the next 5-10 years and that is my time horizon.

When the economy picks up Energy will once again be a big issue that will act as a brake on the economic expansion. This will negatively effect the major stock indexes to energy's benefit.

Once again, that's just my opinion, I could be wrong.

-- posted by lcha

Top 691. Sep 7, 2001 7:21 AM

» JenL_2 - Re: Energy Funds

In response to message posted by lcha:

Lcha - you said...

If you look at the holdings, Vanguard is the most conservative and Invesco is the most aggressive. The year to date returns in this down year reflect that. I have owned the Invesco Energy fund since 1998 and have not sold any shares.

Yup the 3 YR chart shows it....the Invesco Energy fund outperformed for the last 3 years, even though it's down the most YTD.

<img src="http://pvcharts.quicken.com/bin/icenter...." width=470 height=250>
Energy Funds 3 YR Chart

There are other energy funds for comparison in Quicken.com if you click on compare funds. I only charted one fund with the largest net assets from each fund family.

Lcha - Do you DCA into FSTEX or just buy and hold?.....Jen

-- posted by JenL_2

Top 692. Sep 7, 2001 8:28 AM

» lcha - Re: Re: Energy Funds

In response to message posted by JenL_2:

I bought FSTEX one time in 1998 as a base energy fund and have not bought or sold any since. I have since bought individual energy stocks.

-- posted by lcha

http://www.suite101.com/discussion.cfm/i...

Top 693. Sep 7, 2001 8:42 PM

» JenL_2 - ChevronTexaco

In response to message posted by lcha:

Lcha - your 9/4 CNNfn article finds value in Chevron:

Chevron

Over the past five years, Chevron has
increased its earnings at an annualized rate
of 19 percent vs. 12 percent for
ExxonMobil. Chevron (CHV: up $0.59 to
$91.34, Research, Estimates) also has a
higher dividend yield than Exxon, 2.8
percent vs. 2.2 percent, yet its current P/E
of 12 is five points lower than Exxon's.
Exxon is a great company, but we cannot
think of any good reason why Chevron
should be that much cheaper. Neither can
Goldman Sachs oil analyst Arjun Murti,
which is why Chevron is his top Big Oil
stock pick. "We think the valuation gap
ought to close to 2.5 P/E points and could
ultimately go back to parity," says Murti.

The catalyst for a higher Chevron P/E (and
thus a higher stock price) could be its
pending $38 billion acquisition of Texaco.
Murti believes Exxon's current premium
stems from its larger representation in the
S&P 500 index -- 2.69 percent vs.
Chevron's 0.56 percent. "As the S&P 500
was rising at a 20 percent clip during the
latter part of the 1990s, many active
portfolio managers felt pressure to own the
bellwether index names," Murti says. Once
the Texaco deal closes, Chevron's S&P
500 weighting should increase to 0.93
percent, significantly enhancing demand for
the stock.

The Texaco merger will help in more
obvious ways as well. "There's a story there
of cost savings that some of the other
majors just don't have," says Michael
Hoover, manager of the Excelsior Energy &
Natural Resources fund. Chevron is
predicting $1.2 billion a year in
merger-related cost savings, and Hoover
suspects that figure is low.

Also posted above is this article on the Chevron-Texaco merger in 5/27 WSJ:

and this from 9/7 WSJ:

Federal Regulators Approve Merger Of Oil Giants Chevron and Texaco

A WALL STREET JOURNAL ONLINE News Roundup

Chevron Corp. (CHV) received approval from the Federal Trade Commission to proceed with its $39.3 billion acquisition of Texaco Inc. (TX), creating the second-largest oil company in the U.S.

The companies agreed to satisfy several conditions in order to complete the transaction. Texaco, White Plains, N.Y., will sell its share of two massive U.S. refining and marketing ventures, Equilon Enterprises LLC and Motiva Enterprises LLC, which are operated with Shell Oil Co., a unit of Royal Dutch/Shell Group as part of a deal with the FTC.

The sale of Equilon and Motiva hinges on Texaco's negotiations with Shell. If those talks fail Chevron, of San Francisco, and Texaco have asked the FTC to allow them to put the two joint ventures into a trust.

Texaco also will be required to sell some U.S. natural-gas processing and transportation facilities and a portion of its general-aviation fuel-marketing operations.

The companies also said they have negotiated a consent decree with the attorneys general of 12 states and said they have obtained regulatory approvals from the European Union and several countries where the companies have major operations.

The deal is expected to close Oct. 9 when the two companies' shareholders vote on the deal.

ChevronTexaco Corp., as the new company will be named, will have a combined market value of more than $100 billion, assets of $83 billion, net proved reserves of 11.5 billion barrels of oil equivalent and daily production of 2.7 million barrels of oil equivalent. Its shares will trade on the New York Stock Exchange under the new ticker symbol CVX.

ChevronTexaco will be the world's fourth-largest producer of oil and natural gas with petroleum products marketed in 180 countries.

Chevron's chairman and chief executive, David J. O'Reilly, will lead the combined company in the same capacity. Texaco Chairman and Chief Executive Glenn F. Tilton, and Chevron Vice Chairman Richard H. Matzke, will serve as vice chairmen.

Analysts regard the two companies as a good fit because they have many complementary operations internationally, including West Africa and Brazil, home to some of the world's largest new oil fields.

Chevron tried to buy Texaco in 1999, but those talks unraveled over disagreements about price and issues of control. When Chevron's then-CEO, Kenneth Derr, retired at the end of 1999, Mr. O'Reilly took over, paving the way to reopen talks with Texaco.

Subscribe to WSJ Online @ http://www.wsj.com

<img SRC="http://chart.bigcharts.com/industry/bigc... TX&comp=ONG:171576&rand=2241" width=527 height=316>
CHV, TX, Oil & Gas Index (ONG), Large Oil Company Index (OIL), S&P500 1 YR Chart

(chart doesn't show dividends reinvested)

Any thoughts on the CHV-TX merger?.....Jen

-- posted by JenL_2

Top 694. Sep 8, 2001 5:28 AM

» lcha - Re: ChevronTexaco

In response to message posted by JenL_2:

The only thought I have is that these big giant oil compamies just can not explore efficiently. There are too many layers of management that subjective decisions like where to drill need to go through to do it effectively.

They are good at buying up smaller companies that have reserves so that is where my portfolio may benefit.

-- posted by lcha

Top 695. Sep 8, 2001 7:02 PM

» lcha - NG Demand

From Barrons 9/10

Natural-gas demand is bottoming and should pick up by the end of the year. So says Bob Christensen, a gas analyst with FAC/Equities, who suggests that last week's National Association of Purchasing Managers Index for August produced a bullish signal.

How so? Well, the NAPM Index is a leading indicator of U.S. manufacturing; a reading above 50 generally means that activity is expanding, while one below 50 means it is contracting. August's number was 47.9%. That is up 9.9% -- 430 basis points above July's 43.6.

And while the number is still below 50, the positive rate of change "is very, very encouraging," Christensen maintains.

He adds: "Our empirical work on this subject shows that a change in U.S. industrial natural-gas demand generally lags that of NAPM, on average, by four months. Based on the recent data, this would imply that U.S. industrial natural- gas demand may begin to turn positive by December 2001."

That would be welcome news to this downtrodden market, which at the beginning of the year was perhaps the brightest light in the commodity field.

Natural-gas commanded more than $10 per million British thermal units during the first quarter, thanks to meager storage and hefty demand. But this choked demand from industry, which accounts for 44% of natural-gas use in the U.S.

In addition, the high prices early in the year encouraged imports of natural-gas substitutes, such as No. 6 residual fuel, which tripled to 700,000 barrels a day, trimming gas demand by about 3.3%.

Demand was also hurt by a cooler-than-normal summer in the three regions most dependent on gas-fired electric generation -- the West Coast and the West South Central and South Atlantic states.

This created a new problem for the gas market: the prospect of inventories swelling to more than three trillion cubic feet by the beginning of the winter heating season. That would be 402 billion cubic feet over the level 12 months before.

Thus, late last week, natural gas was trading on the New York Mercantile Exchange for just $2.35 per MMBtus, or 77% below the winter high. Futures are likely to stay depressed. In fact, Christensen sees the price in the second half of the year averaging $2.80 per MMBtus.

--------------------------------------------------------------------------------
Key Commodity Indexes
CRB Group Indexes 9/7 8/31 Yr. Ago
CRB Futures 198.50 199.63 230.21
Industrials 146.56 151.88 225.36
Grain/Oils 169.78 174.53 161.83
Livestock 245.40 242.91 225.53
Energy 251.37 243.81 301.61
Precious Metals 230.65 231.27 272.28
Barron's/Bridge-Telerate

--------------------------------------------------------------------------------

Frank Bracken, an energy exploration and production analyst at Jefferies, agrees. He is "inclined to believe that September and October will be more difficult than August from a pricing perspective, and that meaningful gas-price momentum is still a ways off." His target for the next six months is $3 per MMBtus.

The stocks of natural-gas producers, for the most part, reflect the weak demand picture. Shares of Apache, Anadarko and Devon Energy have all slid by 25%-30% since the beginning of the year. (Devon, which previously had agreed to buy Mitchell Energy & Development in a $3.1 billion transaction, said last week that it is acquiring Anderson Exploration for $3.4 billion. The deals will make Devon the top independent U.S. natural-gas producer.)

But Christensen likes the prospects of oil-and-gas service companies.

Although the exploration and production outfits have been aggressively seeking new supplies, with over 1,050 rigs in the field these days, production keeps dwindling; it sank 1% in the second quarter. Furthermore, the number of rigs in use seems to be peaking. "If we drop rigs now, heaven help us by 2002," says Christensen. "Then we'll see supplies fall by perhaps 3%."

Christensen predicts that the exploration and production group will become more aggressive in its drilling, using more sophisticated equipment. And that should benefit the gas-service specialists.

Companies he particularly favors include Key Energy, the largest servicer of rigs and wells, and Unit Corp., which does the deepest on-shore drilling in the U.S. His target for both companies' shares: $25. Each was trading below $10 recently.

As mentioned above, Devon Energy announced last week that it would acquire Anderson Exploration in a deal that values the company at a debt-adjusted multiple of eight times cash flow -- a sharp premium to Devon's multiple of about five times.

As a result, some Wall Street analysts lowered their target price on Devon's shares to reflect the premium paid for the acquisition. One of those analysts was Lehman Brothers' Tom Driscoll, who now sees the stock eventually hitting $53, down from his previous estimate of $69. Still, he notes that the acquisition will expand Devon's reserves by 35% and raise the firm's book value by 44%. Late Friday, Devon's shares were at $43.15, down 6.5% on the week.

-- posted by lcha

Top 696. Sep 8, 2001 11:21 PM

» JenL_2 - Re: NG Demand

In response to message posted by lcha:

Lcha - interesting how some analysts like the E&P, some like service, and some like the big Oil & Gas companies. From the Barron's article....

Companies he particularly favors include Key Energy (KEG), the largest servicer of rigs and wells, and Unit Corp. (UNT), which does the deepest on-shore drilling in the U.S. His target for both companies' shares: $25. Each was trading below $10 recently.

<img src="http://chart.bigcharts.com/industry/bigc... UNT&comp=ONG:171576&rand=6073" width=527 height=316>
KEG, UNT, Oil & Gas index (ONG), Oilfield Equipment & Services Index (EQS)

KEG & UNT look pretty volatile compared to the indices and his target is $25 - sounds more like a trade than a long-term investment.

Lcha.....reading and contributing to this thread has been quite an education. Thanks.....Jen

-- posted by JenL_2

There Are Lots of Jobs Available If You Want to Be a Roughneck

Top 697. Sep 9, 2001 9:39 AM

» JenL_2 - Re: NG Demand

In response to message posted by lcha:

This story in 9/7 WSJ indicates that the NG industry is gearing up to accomodate expected increased demand ....

By ANN ZIMMERMAN

FAIRFIELD, Texas -- When a football scholarship fell through, Bronson "Bull" Holmes dropped out of college. The tuition was just too much of a burden on his single mother, who runs a convenience store.

Standing on the grimy, hot deck of Rig 203 as it corkscrews through 20,000 feet of mud and rock, the 26-year-old derrick hand says he always meant to go back to school to study criminal justice. But with drilling busier than it has been in years, things are just too sweet for him to leave this town 1 1/2 hours north of Houston.

So sweet, in fact, that three months ago he paid off the mortgage on his mother's mobile home. In the past two years, he has had three big raises. He now pulls down nearly $50,000 a year as the drilling company he works for fights a serious labor shortage in the oil patch.

"We ain't hurtin' now," says Mr. Holmes.

San Francisco and San Jose may have been the places to be two years ago. But in the midst of the broadly deteriorating U.S. economy, employment boom towns have been springing up in places such as Rock Springs and Gillette, Wyo., across east Texas and the Rocky Mountains. Rigs have sprouted all over as more natural-gas wells are being drilled than at any time in nearly 20 years. This summer, the number of active rigs hit 1,293, more than double the number operating in early 1999 -- darker days for the industry.

Applicants here don't need fancy degrees or venture capital to be roughnecks, the term for lower-level oil-field workers. Rather, muscle, the ability to survive sweltering heat and a willingness to bunk with co-workers can pay off. Drilling companies and contractors are in such desperate need of hands that they are paying $75,000 a year or more to roughnecks working seven days on and seven days off.

Two years ago, there were hardly any such job openings and they paid as little as $20,000. But natural-gas prices went from a low of $2.25 per thousand cubic feet in late 1999 to $3 in the spring of 2000, soaring to a high of $10 in late 2000. Though the price has fallen back recently to less than $3, new gas-fired power plants are due to come online in the next few years, and demand for gas is likely to rise.

High prices have meant fabulous profits for energy companies and the businesses that serve them. Nabors Industries Inc., the Houston driller that employs Mr. Holmes, saw its profit more than quadruple, to $187 million in the first six months of this year over the like period in 2000.

Some of those newfound oil riches are helping to rejuvenate once-sleepy towns such as Fairfield and surrounding Freestone County. Between the energy boom and a new power plant going in, the streets of Fairfield, a town of 3,500, are clogged with traffic. Restaurants are packed; rental housing is impossible to find. The Holiday Inn Express, one of four motels, has been booked solid on weekdays for about a year, according to hotel manager Jay Patel.

Business has been so brisk at the Bossier Country Chevrolet and Chrysler dealership that it recently completed a $2 million remodeling and expansion, aided by a 15% increase in gross sales. And thanks to natural-gas drilling, the value of taxable property swelled by $500 million, or 42%. The tax rate has been reduced and, even so, tax revenue is up $5.3 million, or 30%, this year.

County employees were given a 10% raise, county Judge Linda Grant says, and plans are afoot to fix streets, double the appropriation for renovating the Freestone County Museum and give $15,000 to a railroad museum.

The renewed activity in the oil patch has been a boon to Gilbert Daniel, owner of five restaurants in town. He estimates sales are up 20% this year.

Yet to the people around Fairfield, this boom seems different from the last one, tamer and somewhat less ostentatious. Sheriff Ralph Billings chalks it up to folks learning their lesson in the early '80s. "After going through two busts, it seems more people aren't living so wild and free this time," he says. "Now there is a realization, from top to bottom, that good times can end just as quickly as they came."

The workers doing the heavy lifting say they are trying to be careful with their money this time -- not running off to Louisiana casinos so much.

The roughnecks put in 12-hour days, at wage rates ranging from $13 an hour to $19.25. For more than half their time, they are paid time-and-a-half. They also collect a $20-per-day food allowance. Most of the men live too far away to commute, so after their shifts, they kick back in rent-free, air-conditioned mobile homes, with full kitchens and a washer and dryer, sharing a room with six other guys in bunk beds.

The industry lost one generation of hands in the mid-1980s slump and another in the slump in late 1998, says James Nash, a burly, snuff-dipping Nabors superintendent sporting mirrored sunglasses and a gold-nugget ring.

When work started picking up last year and the number of rigs in and around Fairfield grew, Nabors put up Mr. Nash, his wife, Brenda, and their two toy white poodles in a doublewide trailer a few miles off the highway. They check on their house in Nacogdoches, about 100 miles away, every few weeks.

On the wide front porch of the mobile home, which doubles as a field office, a pile of job applications sits on a table under a paperweight that says "24-7." Most days, he gets pretty far into the stack. Mr. Nash has hired about 400 workers in the past year to work here in the Bossier Sand Pla oil and natural-gas field.

"It's a gravy train now," says Nathan Simmons, Rig 203's tool pusher, the equivalent of a ship captain. Mr. Simmons, now earning about $75,000 a year, just bought himself a brand-new Ford 350 diesel dual-exhaust truck, in silver, and a travel trailer. His wife, a nursing director for a home health agency, just got a new Buick.

The work can be hard and potentially dangerous, and it takes him away from his wife and three children, who live 3 1/2 hours away on a farm in Louisiana. But he says, "I never dreamed I'd be making this much working six months a year."

Such a dream is what prompted Royce Bayless to hitchhike five days from Joplin, Mo., in search of a job. He had just left his marriage of 15 years -- "It wasn't working out," he says -- arriving with the clothes he was wearing and a knapsack with some extra shirts and a razor.

Mr. Bayless, 36, was a derrick hand for Nabors in Wyoming in the mid-1990s before the work dried up and he ended up peddling fruit in Missouri. Once his previous experience was confirmed and he passed a drug test and physical, Mr. Bayless was given a job as a floor hand screwing together 34-foot-long drill pipe on Rig 255.

There, he started working for tool pusher David Roop, 37, who recently bought a 22-foot Cajun fishing boat and purchased 6 1/2 acres of land in the bucolic Texas Hill Country -- the same part of the state where dot-comers and "Dell-ionaires" from Austin snapped up acreage. There, Mr. Roop and his wife plan to build their dream house.

Mr. Bayless has dreams of his own. "I'm ready for a new start, a new stake in life," he says. "And I knew I'd find it in the oil fields."

Subscribe to WSJ Online @ http://www.wsj.com

.....Jen

-- posted by JenL_2

Top 698. Sep 12, 2001 5:35 AM

» Rande - Heard reports that some gas stations have immediately raised the

Heard reports that some gas stations have immediately raised the price by 20 cents at the pump, despite that the fact that there has been no disruption to supply, inventories remain high, and OPEC has expressed a willingness to supply all the oil that's needed without regard to their price bands. Is there anyone left who still doesn't understand the public's negative reaction to this this kind of price-gouging and profiteering?

-- posted by Rande