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-----Original Message----- From: Stanley.K.Horton@dynegy.com [mailto:Stanley.K.Horton@dynegy.com] Sent: Wednesday, June 05, 2002 7:50 AM To: Parks, Joe Subject: Raymond James Energy Daily Update - Wednesday 6/5/02 ----- Forwarded by Stanley K Horton/HOU/Dynegy on 06/05/02 07:49 AM ----- James Mullins <JMullins3@ECM.RJ To: F.com< cc: Subject: Raymond James Energy Daily Update - Wednesday 6/5/02 06/05/02 07:48 AM Wednesday 6/5/02 Raymond James Energy Daily Update FOR INTERNAL USE ONLY Energy Price Summary (Close Tuesday 6/4/02): Oil (WTI) - $25.33, up $0.25 12-Month Oil Futures Strip - $24.70, up $0.21 Natural Gas (HHUB) -$3.33, up $0.09 12-Month Natural Gas Futures Strip - $3.65, up $0.06 1% Residual Oil (on a MMBtu basis) - $3.91, up $0.04 London Crude Oil - $24.24, down $0.21 (so far this morning) 1) Energy Stocks Could See Weakness Over Next Month; Present Buying Opportunity. From a technical analysis standpoint, the oilservice group looks like it will trade sideways to down over the next month. On the fundamental analysis side, there are no visible positive catalysts expected until July, when we should see: 1) a rollover in API inventories, 2) lower natural gas injections with warmer weather, and 3) further evidence of natural gas supply declines in second quarter natural gas production data. While the oil markets have typically seen builds in total petroleum inventories into July, it has experienced larger-than-expected builds over the past few weeks. The energy market is likely to view this as a very bearish sign. We should note that a possible contributor to these abnormal builds is that Iraq was exporting as much oil as possible 45 days ago before it cut off April/May exports in protest to the U.S. and Israel. Bottom line: The charts and fundamentals suggest we could continue to see some weakness in both oil prices and energy stocks over the next 4 weeks. Based upon strong longer-term (6 to 9 month) fundamentals, however, we believe investors should take advantage of any potential weakness over the next month and buy the stocks in anticipation of meaningful year-end upside. 2) The API reported that total petroleum inventories increased 8.3 MMBbls, to 669.0 MMBbls for the week ended May 31, 2002. The average consensus range called for a 0.5 MMBbl draw to a 0.8 MMBbl build in total inventories. This build in total inventories is very bearish for the oil market. Total inventories built largely as a result of much higher crude supplies, as well as greater distillate supplies. Total petroleum inventories are currently 27.2 MMBbls (~4%) above levels one year ago, and continues to climb above the five-year average. Motor gasoline inventories decreased by 0.8 MMBbls to 217.7 MMBbls last week, and are now 8.3 MMBbls above last year at this time. Distillate fuel inventories rose by 2.8 MMBbls to 127.2 MMBbls last week. Distillate inventories are now 20.0 MMBbls above last year at this time. U.S. refinery operations were at a 93.4% utilization rate, which was 1.1% higher than last week's 92.3% rate, and much higher than expectations of an ~0.25% increase. Total petroleum imports decreased slightly to 11.8 MMBbls/day. OILSERVICE 3) Nabors' Re-incorporation Receives Independent Shareholder Group Endorsement Nabors Industries (AMEX:NBR/$40.00/Strong Buy) announced that Institutional Shareholder Services (ISS) has recommended that Nabors shareholder vote in favor of the re-incorporation in Bermuda. ISS is the leading independent provider of proxy analysis and voting advisory services. Yesterday, Nabors' Chairman and CEO Gene Isenberg repeated his belief that the proposed re-incorporation will result in significant tax savings and other long-term benefits for the Company that will outweigh the one-time capital gains taxes that investors will have to pay if the move is approved. A lawsuit that has been filed to try to block the vote appears to be innocuous, as it is not even on the court docket for a scheduling hearing until September and no motions for injunction have been filed yet. A special stockholders meeting to vote on the re-incorporation has been scheduled for June 14(superscript: th). We currently expect that the proposal will pass the shareholder vote. E&P 4) Spring Fire Stops Short of Evergreen Resources' (NYSE:EVG/$43.90/Strong Buy) Coal Bed Methane Operations in Southern Colorado. ? Evergreen reported that the Spring fire in southern Colorado's Las Animas County did not reach the company's coal bed methane operations in the Raton Basin. ? The fire crossed into Evergreen's acreage but stopped one and a half miles short of the company's nearest well location. ? As a precaution, Evergreen shut-in 69 gas wells in the Lorencito Canyon area. These wells were producing at a combined rate of 6.2 million cubic feet (MMcf) of gas per day prior to being shut-in at approximately 5:00 p.m. (MDT), Sunday, June 2. ? This daily production rate represents approximately 5% of Evergreen's current total gross sales of 124 MMcf of gas per day. ? Production from the Lorencito Canyon area was brought back on line yesterday at about 1:00 p.m. (MDT) and is expected to reach its prior average rate within the next several days. ? According to latest reports, the Spring fire is mostly contained. Evergreen has made its produced water available to assist fire-fighting efforts in the area, and does not expect future curtailments of its production unless weather and fire conditions change significantly. 5) ONEOK (NYSE:OKE/$20.78/NR) Sells Equity Interest in Magnum Hunter Resources (Amex:MHR/$7.31/Buy). ? ONEOK announced it has sold its remaining equity interest in MHR, representing 4.9 million shares (~7%) of Magnum Hunter's 70 million shares outstanding. ? The $35.8 million proceeds from this sale will be used to reduce ONEOK's outstanding commercial paper. ? ONEOK, Inc. is a diversified energy company involved primarily in oil and gas production, natural gas processing, gathering, storage and transmission in the mid-continent areas of the United States. 6) Vintage Petroleum (NYSE:VPI/$11.65/Buy) Reiterates Commitment to Business Plan and Reduction Of Indebtedness; Rejects Restructuring Proposal. ? VPI believes that its current depressed stock price is attributable primarily to its position in Argentina, which has experienced a series of economic and political shocks, and Vintage's relatively high leverage, which the company is committed to reducing. ? Vintage recently announced several initiatives to reduce leverage, including the intention to reduce the Company's aggregate indebtedness by $200 million by year-end 2002 through a combination of the sale of non-core assets and cash flow in excess of planned capital expenditures ? In response to the BP Capital Energy Restructuring Plan submitted on May 15, Vintage said that it has reviewed the plan, and concluded that it is not appropriate for the Company to pursue. BP Capital currently owns ~8.9% of the outstanding Vintage common stock. ? The restructuring proposal calls for the liquidation of Vintage's North American assets, creating a pure-play Latin American exploration and production company. 7) Anadarko Petroleum Corporation (NYSE:APC/$49.88/Market Perform) Apparent Winner On 34 Tracts in National Petroleum Reserve-Alaska Lease. ? Anadarko announced that it was the apparent high bidder on a total of 34 tracts in Monday's National Petroleum Reserve-Alaska Oil and Gas Lease Sale 2002. ? Anadarko and its partner, Phillips Alaska Inc., submitted winning bids representing a combined total investment of $9.6 million ($2.7 million net to Anadarko). ? The 34 tracts cover more than 282,000 gross acres and are located primarily west of the companies' Moose's Tooth discovery. ? With this sale -- the second since the federal government resumed leasing in the reserve in 1999 -- Anadarko's leasehold in NPR-A will total 277,500 net acres. Raymond James Energy Group This was prepared for informational purposes only and intended for internal use only. Information contained in this report was received from sources believed to be reliable. Raymond James & Associates assumes no liability for inaccurate or erroneous information. Additional information can be obtained by calling the Houston Energy office at (800) 945-6275.
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