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

U.S. Oils May Bounce When the Bad News Ends

Top 720. Oct 3, 2001 8:07 PM

» JenL_2 - US Oils May Bounce When Bad News Ends

and this from 10/3 Barron's Online:

By Dimitra DeFotis

Economic news has gone from bad to worse since the September 11 terrorist attacks, and so have energy prices. Rather than being boosted by tensions related to the Middle East, crude oil prices have swooned because of fears of a weak economy and soft demand.

Crude was trading at $22.81 Tuesday, down from $27.65 per barrel September 10. Natural gas changed hands at $1.77 per million British thermal units Tuesday, vs. $2.38 per million BTUs on September 10.

That's hit the stocks of drillers and oil service companies particularly hard. Since September 11, the stocks of drilling, exploration and service companies are down between 12% and 16%, according to Thomson Financial/Baseline.

But some investors are willing to look past the current doom and gloom. They say the Federal Reserve's rate cuts and the likelihood of a new stimulus package from the federal government should help the economy -- and energy prices -- eventually recover.

"Interest rate cuts, tax cuts and government spending are going to show up some time over the next year," says John Segner, portfolio manager of the Invesco Energy Fund.

"Once the economies around the world start to grow at more normal rates, we are going to see we do not have enough supply to meet demand."

That's why they're turning more favorable on domestic, integrated oil companies, whose earnings and production growth has exceeded that of the major oil companies. They tend to be diversified: Oil and gas exploration is offset by refining, whose margins grow as commodity prices fall, and by chemical production, which can benefit from lower natural gas prices.

What's more, many integrated companies are not getting any credit for discoveries they've already made and that they will be developing over the next several years. In fact, some integrated companies continue to pursue projects with the knowledge that even $20 oil and natural gas at $2.00 per million British Thermal Units can be profitable, some analysts say.

That may be why the stocks are off only about 5% since September 10, according to Baseline.

Another encouraging sign: Many "integrated oils" are trading at a discount to their underlying asset value, and are cheap relative to the broader market.

"We see potential weakness in commodity prices in the near term, but there are terrific investment opportunities in this group," asserts Steve Enger, oil analyst at Petrie Parkman & Co., a Denver-based energy analysis firm.

"The equity market is factoring in a worst-case scenario," says Jay R. Wilson, an analyst who follows North American integrated oil companies for J.P. Morgan.

"Six months from now, investors will see these stocks were good values."

Wilson says that the domestic integrated companies are selling at roughly a 75% discount to the P/E of the Standard & Poor's 500, based on 2002 projected operating earnings. Historically, they have traded at a 25% discount to the market.

He likes Los Angeles-based Occidental Petroleum (OXY), which makes chemicals as well as being involved in oil and gas exploration and production. Occidental, whose market capitalization is nearly $9 billion, sold noncore properties over the past four years and has added higher-grade oil and gas fields in West Texas and California. Cash flow from acquisitions has dramatically improved Occidental's balance sheet, he says.

At 24.04 Wednesday, the stock fetches nearly 3.8 times Wilson's 2002 cash flow per share estimate of $6.40 and 3.9x his 2003 estimate of $6.20. His estimates presume an average per-barrel crude price of $25 in 2002 and $23 in 2003. The stock is nearly 23% off its 52-week high of 31.1.

Another stock that has generated interest is Bartlesville, Oklahoma- based Phillips (P), which hit a new 52-week low of 50 last week.

Phillips, whose market capitalization is $13.8 billion, acquired BP's Atlantic Richfield Alaskan production last year and completed the acquisition of refiner Tosco Corp. last month.

That should help Phillips balance its refining assets with E&P assets, almost half of which are in Alaska, where federal energy policy could yield expedited permits in the near term and a natural gas pipeline someday.

Enger, who likes Phillips for its "exposure to global megaprojects," estimates Phillips' earnings will dip 35% in 2002 to $4.00 per share, but then jump 26% in 2003 to $5.05. At $53.59 Wednesday (21.5% off its 52-week high of 68.25), the stock is changing hands at 13.4x his 2002 earnings estimate and 10.6x his 2003 estimate. The company is expected to grow earnings 8% on a compounded annual basis over the long term, according to Thomson Financial/First Call.

Of course, these stocks could face more downside as the markets continue to react to the news that's bound to emerge from the U.S. war against terrorism. And most analysts expect companies to pack their worst news into the coming quarter, blaming the Sept. 11 attack for decreased demand in their products and services.

But as we've been saying for several weeks now, energy stocks are reflecting an awful lot of bad news. Any sign of economic improvement could change that quickly.

Subscribe to WSJ & Barron's Online @ http://www.wsj.com

<img src="http://chart.bigcharts.com/industry/bigc... OXY&comp=AAAAA:0&rand=8615" width=527 height=316>
Oil & Gas Index (ONG), P, OXY, S&P500 3 YR Chart

of course the chart doesn't show dividends reinvested, and oil stocks pay dividends I believe......Jen

-- posted by JenL_2

Top 721. Oct 5, 2001 7:59 AM

» lcha - Shame on US

Oct. 4, 2001, 10:20PM

SUVs drag down fuel economy for new vehicles
Associated Press

WASHINGTON -- Average fuel economy of new passenger vehicles is at a 20-year low, largely because of the widespread popularity of sport utility vehicles, the government said in a report Thursday.

"Fuel economy is being traded for weight and power," concludes the analysis produced by the Environmental Protection Agency.

The report is expected to add to the debate over whether the government should require automakers to make their products less fuel-hungry, especially larger SUVs, which are subject to less stringent regulations than are other passenger cars.

In its latest fuel economy trends report, the EPA said the average fuel use of new passenger vehicles -- both sedans and light trucks including SUVs and vans -- has declined 1.9 miles per gallon since 1988 and is at the lowest level since 1980.

The report assessed fuel economy, as obtained in laboratory test runs, of car models from 1975 through 2000. The EPA planned to make public next week its fuel economy numbers for the new 2002 models.

The report said that SUVs, vans and small pickups together accounted for 46 percent of all model 2000 vehicles sold, a percentage that has been fairly constant in recent years.

While automakers over the years have developed more efficient technologies that could reduce fuel consumption, these technologies instead have largely been used "to increase light vehicle weight and acceleration" rather than fuel savings, the report said.

-----------------------------------------------
We could put a giant dent in the oil we depend on from the Middle East dictatorships if we just changed our mindset in this ONE area.

I will NEVER stop harping on this because it is MY son or daughter that may have to die one day protecting a foreign oil dependency we should not have.

-- posted by lcha

Top 722. Oct 5, 2001 9:00 AM

» JenL_2 - Re: Shame on US

In response to message posted by lcha:

SUVs drag down fuel economy for new vehicles

Average fuel economy of new passenger vehicles is at a 20-year low, largely because of the widespread popularity of sport utility vehicles, the government said in a report Thursday. "Fuel economy is being traded for weight and power,"

.....Jen

-- posted by JenL_2

http://www.memshannon.com/suv.htm

Top 723. Oct 6, 2001 11:09 AM

» lcha - S.U.V.Blues

A great blues song

-- posted by lcha

Top 724. Oct 7, 2001 9:29 AM

» lcha - Shell/Alternative fuels

Oct. 5, 2001, 9:33PM

Shell chief says alternative fuels, not oil scarcity, will transform Big Oil
Reuters News Service

NEW YORK -- Big Oil must prepare itself for the end of the hydrocarbon age as alternative energies win over consumers in coming decades, chairman of the world's No. 2 energy firm Royal Dutch/Shell said last week.

Oil giants from the last century will have to look to their laurels if they are not to be unseated as motorists move toward hydrogen-powered vehicles, and renewable energies, such as wind or solar power, emerge, Shell chairman Phil Watts told reporters.

Last century's oil giants can't rest on their laurels unless they are looking to be unseated as motorists move toward hydrogen-powered vehicles and renewable energies such as wind and solar power emerge, Shell Chairman Phil Watts said.

"One thing I am convinced of is that the next 50 years is not going to be more of the same.

"An energy company had better make sure it has the necessary expertise and knowledge," Watts said at the launch of Shell's Long Term Energy Scenarios.

Shell has moved firmly into the same camp as fellow oil supermajor BP, which has made vigorous efforts to carve out an environmentally friendly public image.

The world's No. 1 oil firm, Exxon Mobil, has by contrast concentrated firmly on its oil and gas interests, and had little truck with the environmental lobby.

Shell has pledged to spend between $500 million and $1 billion in the next five years to develop new energy businesses, concentrating on solar and wind energy.

"There will be different sources of energy by the middle of the century. It challenges what our portfolio will be," Watts said.

Oil currently accounts for around 40 percent of primary energy use. While that will fall to barely 25 percent by 2050, oil will still be top dog, according to Shell figures.

"We are going to have oil and gas for many, many years," Watts said.

Automakers Toyota and Honda are already selling hybrid cars that combine traditional engines with battery powered motors.

The vast markets of China and India are key examples of how nations and energy firms alike will need to balance rapidly growing energy needs with rising import dependence and environmental effects, Watts said.

Natural gas will initially pick up much of the slack as oil's preeminence slowly wanes, Watts said.

After that, the outlook is far less certain as new technologies fight to establish themselves.

"We could see an evolutionary progression, the so-called carbon shift, from coal to gas, to renewables, or possibly even to nuclear," said Watts.

"A second scenario explores something rather more revolutionary; the potential for a truly hydrogen economy, growing out of new and exciting developments in fuel cells and advanced hydrocarbon technologies," he added.

Watts said his company is counting on rising consumption of natural gas to make African and Asian projects, including new gas liquefying plants, pay off.

Gas is the cleanest-burning fossil fuel.

According to one Shell scenario, rapid growth in fuel cells, which produce electricity from hydrogen and cut harmful emissions, could shift the energy business dramatically away from oil long before oil becomes scarce.

Radical changes possible in the energy business mean Exxon, BP and Shell cannot afford to assume they will dominate for the next 100 years.

"That would be a very complacent view."

-- posted by lcha

Top 725. Oct 7, 2001 10:30 PM

» JenL_2 - Re: Shame on US

In response to message posted by lcha:

Lcha - you said....

We could put a giant dent in the oil we depend on from the Middle East dictatorships if we just changed our mindset in this ONE area.

Maybe the 9/11 attacks are changing our mindset?....Jen

-- posted by JenL_2

Top 726. Oct 10, 2001 5:48 AM

» lcha - El Paso NOT at fault

Oct. 9, 2001, 10:26PM

FERC judge says El Paso not at fault

But affiliates not cleared in California gas dispute

By DAVID IVANOVICH
Copyright 2001 Houston Chronicle Washington Bureau

WASHINGTON -- Houston-based El Paso Corp. did not improperly use its market power to drive up
natural gas prices in California, a federal judge ruled Tuesday.

But the judge ruled El Paso affiliates did collude to give El Paso's marketing firm an unfair advantage when
bidding for space on a major natural gas pipeline controlled by the company.

Curtis L. Wagner Jr., chief administrative law judge at the Federal Energy Regulatory Commission,
concluded that while El Paso's affiliates had the ability to abuse their market power "the record is not at all
clear that they in fact exercised market power."

California and its utilities claimed El Paso's actions had cost consumers in the state more than $3.7 billion
in higher energy bills, while also worsening California's already-dire electricity shortage. Natural gas is
used to fire about 25 percent of the state's electric generating capacity.

El Paso Chief Executive Officer William Wise, in a prepared statement, said: "We are gratified that Judge
Wagner concluded that no action on the part of El Paso caused high natural gas prices in California during
2000 and 2001."

Doug Atnipp, a partner with the Houston-based law firm Porter & Hedges, said El Paso officials should,
indeed, be relieved.

While Wagner's ruling carries much weight, he does not have the final say. Wagner will forward his
recommendations to the five-member Energy Regulatory Commission, headed Pat Wood, former chairman
of the Texas Public Utility Commission.

Steve Maviglio, a spokesman for California Gov. Gray Davis, said his boss was "disappointed" by the
judge's finding.

"He's renewing his call on FERC and the chairman to continue to be vigilant in addressing gas prices,"
Maviglio.

El Paso owns a key pipeline that transports natural gas from gas-producing basins in West Texas,
Oklahoma and other areas to Southern California.

For years, California's utilities Pacific Gas & Electric and Southern California Edison, as well as a local
distribution company Southern California Gas, owned the rights to transport gas along the pipeline system.
But as California moved to deregulate its electric industry, the state prodded the utilities to give up their
capacity on the line.

In February 2000, El Paso Natural Gas opened bidding for gas marketing firms interested in purchasing a
third of the capacity on the line, representing about one-sixth of the total pipeline capacity running to
Southern California.

An El Paso affiliate, El Paso Merchant Energy Co., won the rights to that capacity for a 15-month period
with a bid of $38.5 million.

The California Public Utilities Commission objected and asked federal regulators to force El Paso to give
back any profits earned under the arrangement.

The case received little attention until blackouts started rolling across California. And suddenly, the El
Paso complaint emerged as the bellwether case.

At issue was whether El Paso, the nation's largest gas pipeline company, violated federal law by purposely
withholding capacity on its interstate pipeline during a crucial period when gas demand was on the rise last
year.

California officials alleged El Paso had refused to make that space available, exercising its "market
power" to artificially raise prices.

El Paso officials argued the run-up gas prices was caused, not by their decisions, but by an unanticipated --
and unprecedented -- surge in demand.

Harvey Morris, principle counsel for the California PUC, said state officials will now appeal directly to
the full commission.

"We're optimistic," Morris said. "We have strong case to make to FERC."

If California officials do not receive satisfaction there, they will have the right to appeal the case to the
U.S. Court of Appeals.

Wagner's opinion was released after the market closed Tuesday. El Paso stock rose 37 cents to close at
$48.75 Tuesday.
--------------------------------------------------
Once again the CA governor WASTE taxpayers money and time. How much has this guy cost CA residents? BILLIONS. Real smooth move locking in long term NG contracts last spring at $5.00/MCF. What are prices today, $2.00.

-- posted by lcha

Top 727. Oct 10, 2001 8:17 AM

» lcha - What your oil $$$ support

I post this here because it does relate to energy.
This is from the Oct 10 WSJ, editorial section

Arabia's Royal Family Must
Choose

By Stephen Schwartz, author of "Kosovo:
Background to a War" and "Intellectuals
and Assassins," both from Anthem Press.

Perhaps the most satisfying aspect of
Sunday's military action against the
Taliban regime and its puppet master,
Osama bin Laden, was the absence of
Saudi Arabia, and the so-called Arab
coalition in general, from major
involvement in the effort. For the Saudis
are the primary sponsors of precisely the
brand of fundamentalist Islam that animates bin Laden and the Taliban regime that
protects him.

For years, Saudi Arabia has pursued a Janus-faced foreign policy. It has played
along with the U.S. when it has suited its interest -- economically, when oil
payments were involved, and militarily, when it needed us to save Kuwait from
Saddam. At the same time, however, Saudi religious institutions and a powerful
element within the Saudi state have created the environment in which bin Laden
found recruits, thereby contributing to the problem we have today.

With U.S. President George W. Bush insisting that "you are either with us or you
are with the terrorists," it's time the House of Saud made its choice. When
President Bush and other Western leaders repeatedly assured their publics that
terrorism is at odds with true Islam, and were echoed by Islamic scholars in many
Muslim and non-Muslim countries, they were right and wrong.

Extremist Form of Islam

The violent, nihilistic strain of Islam that encourages bin Laden and his followers
represents neither a majority of Muslims nor traditional Islamic values. But this is
also not a matter of a simple hijacking of the faith. Saudi Arabia is the richest and
most powerful of all the Muslim nations, and the Saudis have used their vast oil
income and their control of the two holy places, Mecca and Medina, to promote an
extremist form of Islam world-wide.

This mode of behavior originates in the Saudi-backed ultra-puritanical sect known
as Wahhabism. Wahhabism is named for an 18th-century Arabian Muslim,
Muhammad bin Abdul Wahhab, who formed a partnership with the Saud family.
The official ideology of the Saudi kingdom, Wahhabism is distinctive in recent
Islamic history for its approval of violence against Muslims who reject
fundamentalism, as well as against non-Muslim children, civilians, and
noncombatants when Muslims wage war against non-Muslims. Both of these
concepts were traditionally forbidden in Islam.

Western governments and media have been hesitant to recognize these realities. Yet
the trail of evidence for the September 11 atrocities repeatedly leads back to the
Saudis and Wahhabism. When the last will of Muhammad Atta, leader of the
hijacking team, was published, the text was replete with Wahhabi rhetoric. For
example, the will called on mourners to refrain from ostentatious expressions of
sorrow, such as weeping, crying out, or rending garments, which Atta rejected as
"ignorant" practices. As Muslim religious leader and professor of religious studies
in the U.S., Abdul-Aziz Sachedina, pointed out, "this is a Saudi Wahhabi
connection ... They are the ones who tell other Muslims not to show their
emotions."

There is more such evidence, but much of it has remained unelucidated. Major
Saudi charities including the International Islamic Relief Organization employed
some participants in the hijacking conspiracy, but the IIRO and similar groups were
left off the list of terror backers put forward by the U.S. authorities, reportedly to
save the Saudi family embarrassment. Several of the conspirators themselves were
apparently Saudi citizens. Although bin Laden, born in Saudi Arabia, was expelled
from his native land and stripped of his citizenship, it has long been clear that he
continues to enjoy significant support from the country's elite.

Saudi actions against bin Laden were cosmetic. From the fairly successful effort of
the Saudis to obstruct a full investigation of the Khobar Towers bombing in 1996,
in which 19 American service personnel were killed, to their reluctance to allow the
use of U.S. airbases on their territory for actions against bin Laden and the Taliban,
the Saudis have followed a pattern established generations ago.

During World War I, the Saud family took British money on the promise they
would rise against the Ottomans, but chose to hold back from fighting and
consolidate the Wahhabi hold over the Arabian peninsula once the most famous of
several Arab revolts against the Turks began in 1916. Among the most
contemptible aspects of bin Laden's perversion of Islam is his demand that Saudi
Arabia drive out "infidel" U.S. soldiers, when the Saudi regime, without which bin
Laden would never have been heard of, has always depended on foreign support.

The Saudi state subsidizes Wahhabism throughout the Muslim world, from
Morocco to Malaysia, training imams, building mosques, and recruiting combatants
for terrorist adventures in places like Chechnya and Uzbekistan. This is all old news
to Muslims. In 1993, Egyptian media revealed that terrorists from that country had
gained financial and military support from the Saudis, including Prince Turki bin
Faisal, head of the Saudi intelligence service, who was abruptly fired only a few
weeks ago.

An obscure academic paper by a Saudi student at Harvard, Nawaf Obaid, revealed
links between the Saudi religious bureaucracy and the Taliban, noting that the Saudi
religious police created a comparable body in Afghanistan. It was this Saudi-trained
police force that drove women out of public view in Afghanistan. Worse, Mr.
Obaid's study indicated that the Khobar Towers attack was rooted in "the
mainstream Wahhabi sect."

Especially Active

Incredibly, the Saudi Wahhabi network is especially active among American
Muslims. Through one of its main front groups, the Islamic Society of North
America, the Saudi regime and its religious network influence a majority of
mosques in the U.S. -- to the point where they determine what sermons will be
delivered at the weekly assembly or juma prayers on Friday. At times the Friday
sermon or khutba has been faxed to American mosques from Riyadh, the Saudi
capital. The same habits are visible throughout Europe.

It will not be easy for the West to force the Saudis to cease pursuing this two-faced
tactic. Clearly, it is most important in the short term to begin a dialogue with
non-Wahhabi, traditional Muslims. Uzbekistan, which has replaced the hypocritical
Arab states in the military effort against bin Laden and the Taliban, represents an
obvious case in point. The Uzbeks have every reason to be proud of their Islamic
culture and traditions; Central Asia produced, historically, some of the greatest
achievements in Muslim philosophy, science, mathematics, theology, and
spirituality.

But that country, a dictatorship, is threatened by the Islamic Movement of
Uzbekistan, a classic Wahhabi terror group. With Western help, Muslim societies
uncorrupted by Wahhabism, like Uzbekistan, may resume their historic roles as
leaders of the Islamic world. It's time to stop appeasing the Saudis, and to find new
and better Muslim friends.

-- posted by lcha

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

Top 728. Oct 10, 2001 9:28 AM

» JenL_2 - Re: What your oil $$$ support

In response to message posted by lcha:

Thanks for the article Lcha.....

It's a very difficult problem. I think that an extreme fundamentalist form of Islam, be it Wahhabism or whatever, has gained increasing control in every Islamic country, even moderate Islamic countries, maybe even in Islamic communities in Western countries.

Having lived in a moderate Islamic country, Malaysia, for 4 years in the 70's......I noticed a shift to a more fundamentalist Islam and increasing control of the people by the Imams in 1976. I'm not familiar enough with Middle Eastern history to know what external influences caused this change. Now I read that two states of Malaysia are controled by fundamentalist Islamic parties, that are increasing control in Malaysian politics and threaten to take control of their government. Malaysia has a public school system with a set British influenced syllabus, but they also have Islamic schools. I've posted on the "Terrorist Attacks" thread about these Islamic schools throughout the Islamic world that seem to be indoctrinating children in extreme fundamentalism and are recruiting grounds for terrorists:

I hope that the 9/11 terrorist attacks will somehow force the Islamic world to face up to the fact that extreme fanatic Islam sects are thugs that do not represent true Islam, and that by continuing to support and take support from these groups they are guilty by association. They have to root out their own evil - we can't do it for them.........Jen

-- posted by JenL_2