If Monday's action is any indication, independent exploration and production (E&P) companies as well as major oils are the place to be in the oil patch.
Overall, independent E&P firms as well as the major integrateds held their ground better than drillers, onshore or off, and service companies on Monday.
was up 7/16, or 1.3%, to 33 9/16, and
ended up 3.1% to 35 7/16. On the major integrated side,
gained 1 3/16 to close at 69 11/16 and
rose 7/8, or 1.2%, to close at 75 5/8.
"I think the E&P's are among the more interesting companies out there," says David Stadlin, manager of
Smith Barney Natural Resources fund. "My sense is that the more 'fast-money' guys in the service companies are basically out and now some guys are taking long hard looks at the E&P sector."
Still, all bets are off, at least until the current phase of the oil-for-food deal with Iraq is decided. This week the UN Security Council will begin discussing Secretary General Kofi Annan's proposal that Iraq be allowed to export as much $5.2 billion worth of oil over a six-month period -- a dollar figure that would put Iraq's production facilities pumping at near capacity levels of about two million barrels per day. Crude futures for March delivery closed Monday at $17.04, down 16 cents.
"I think a lot depends on how these talks in Iraq go. That's a big if," says Victor Yu, vice president at
, a commodities broker. "And you know we could find ourselves back in the same position" where we were at the end of last week, Yu added, referring to the threat of military action and a concomitant sector rally. But "as long as they're talking, there's not going to be any shooting, which has the markets on edge."
The threat of $15 or even $14 oil is still very much out there, as long as the perceived supply exceeds present demand. And yet, at the same time, investors contend that in the long run the world's energy demand coupled with the oilfield equipment shortage will bode well for the industry.
Those conflicting views played themselves out to the fullest Monday, as stocks in every niche of the sector were mixed. Among the deepwaters, for example,
fell 4.5%, or 1 3/8, to 29,
fell 7/8 to 43 3/4, but
gained 3/8 to close at 40 1/8.
Land drillers ended the day in mostly negative territory, but
closed up 5/16 at 24 1/4. The equipment makers fared similarly:
, which reported strong earnings Monday, rose 11/16 to 27 3/16, but
lost 1/16 to close at 21 3/4.
In what is always viewed as a negative for the entire sector,
closed down 3/8, at 73 5/16.