It's hard for investors to believe oil stocks are worth investing in when the thing that drives the stock -- the commodity price -- is going to go down next year. |
News that the U.S. economy posted a weaker-than-expected 1.1% annual growth rate for the fourth quarter ... did not impact the oil-service stocks, which rallied by 1.8% (Friday) on the strength of better-than-expected quarterly results provided by Halliburton. |
Only four or five companies can do this in the world, and Halliburton is one. This has nothing to do with Dick Cheney. |
The industry has done well this year and commodity prices are up so high that no one thinks there is any substantial improvement to this year's level of activity. |
The market doesn't give these companies much credit because it's a non-recurring event. |
The weakness in natural gas prices, having fallen from an extreme of $15 a current $7.50 with (more than) 60% of the winter heating season already over, provides risk of a natural-gas-inspired 'bump' coming over the next two quarters. |
Typically, when commodity price estimates decline, so do the stocks. These are dangerous times. |
We remain positive based on economic activity and E&P spending; we're also positive on 2007 but see some risk to E&P spending given the potential squeeze on returns (with) a possible moderation in commodity prices in '07. |
We remain positive based on economic activity and E&P spending; we're also positive on 2007 but see some risk to E&P spending given the potential squeeze on returns (with) a possible moderation in commodity prices in '07. Visibility remains too good to worry too early, however. |