Is Conoco CEO smart in acquiring BR?

**blast_investor** Mon Dec 12, 2005 3:24 pm

Is Conoco CEO smart in acquiring BR?
Conoco is aggressive into betting on high natural gas price if it buys BR.

Conoco is No.3 Major Oil and Gas integrated firm.

Before this rumor, the main strategy for major oil and gas firms is to ignore North America resource and focus on drilling overseas.

In fact, Exxon Mobil CEO Mr. Lee R. Raymond once said that "in such high energy price in such cyclical industry, it is hard to buy asset".

But Conoco (COP) CEO Mr. James J. Mulva is aggressive. COP acquired refining asset before, now COP is aggressively into buying North America natural gas asset.

Fact on Burlington Resources (BR):

80% of BR asset is natural gas asset.

Acquiring BR is essentially a bet on high natural gas price. US natural gas price is at all time high around $14 MMBtu. But most oil and gas industry experts and therefore Wall Street analysts still use $6 MMBtu as base natural gas price to value natural gas asset.

Do you believe COP CEO is smart in buying BR?

**blast_investor** Mon Dec 12, 2005 3:42 pm

Of course, Conoco (COP) CEO Mr. James J. Mulva is not using this $6 MMBtu industry conventional wisdom price to value BR. Because under $6 MMNtu price, BR stock is fairly valued, not that cheap stock.

But if Mr. Mulva believes much higher price than $6 MMBtu natural gas price, then BR stock is dirt cheap.

The current NYSE natural gas price is around $14 MMBtu.

**abyli** Mon Dec 12, 2005 4:10 pm

Yeah. I agree that the high oil price will stay longer than those analysts expected. Blast, which oil stock is most undervalued right now?

**blast_investor** Mon Dec 12, 2005 4:11 pm

NYSE Monthly Natural Gas Price Chart

http://futures.tradingcharts.com/chart/NG/M

**blast_investor** Mon Dec 12, 2005 10:54 pm

Canadian oil gas stocks are hot, but from my study, many Canadian oil and gas stocks are actually pretty expensive. Many of them may be into "bubble" valuation level.

Many small cap or micro-cap oil gas stocks are pure speculation, no earning, no reserve, many of them are purely story stocks with some rumors of huge reserve in remote places.

Major Oil stocks such as COP are pretty attractive. But still they are not my favorite.

Many foreign oil stocks are cheap, but the political risk is high.

My favorite stocks are US mid-cap independent oil and gas drillers. Many of them are dirt cheap, much cheaper than Canadian equivalent stocks. My guess is that US investors are not that familiar with resource stocks as Canadians are.

But hey, with more and more news and rumors like COP buying BR, Americans can catch up with Canadians as well in oil and commodities investment.

You can search "WLL" or "CHK" for my past articles on oil and gas stocks. Especially, CHK is favorite gas stock of Jim Cramer. But I believe I picked CHK way earlier than Mr. Cramer on this stock.

abyli wrote: Yeah. I agree that the high oil price will stay longer than those analysts expected. Blast, which oil stock is most undervalued right now?

**blast_investor** Tue Dec 13, 2005 1:14 am

ConocoPhillips to Buy Burlington Resources for $92 a share

http://biz.yahoo.com/ap/051212/conocophillips_burlington.html?.v=14

**blast_investor** Tue Dec 13, 2005 1:15 am

Excellent.

I have been pounding the table for years that natural gas stocks are cheap. But most of Wall Street analysts do not care that much about NAV value of BR or CHK. The reason is that they heard that $6 MMBtu is the basis for valuation from Major Oil Gas integrated firms and they just stick with it without checking the reality.

Now things start to change. This is first recognition from a CEO of Major Oil Gas firm that, $6 MMBtu price as base for valuing natural gas stock is just too low. BR is not cheap at all if the natural gas price is $6 MMBtu. This is also a change from Major oil gas firms' past strategy of focusing on overseas drilling + LNG (liquefied Natural Gas). At least, one of top 3 major oil gas firm realizes that LNG is not a silver bullet that can solve all the natural gas shortage problem. LNG is at least 3 to 5 years away to really have an impact.

Natural gas price right now is $14 to $15 MMbtu, that is the reality.