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Survey Says Gas Prices Will Surpass $3 Before 2000

Survey Says Gas Prices Will Surpass $3 Before 2000

A sample of energy industry experts attending the Dain Rauscher Wessels Energy Conference in Houston expect prices to strengthen toward the end of this year, only to give way to general price weakness in 2000. Many of the 146 people polled at the conference said they expected gas prices at the Henry Hub to surge towards $3.10 before the end of this year, then fall to the $2.50 level early next year. Overall, 800 energy industry experts, company representatives, institutional investors and securities analysts attended the four-day conference, which ended last week.

The poll was distributed to all attendees. Respondents were asked six questions about oil and gas prices, stock performance and energy companies likely to merge. Answers to the pricing questions were averaged to calculate the results.

"The results reflect some skepticism about the current commodity price environment," said Jim Wicklund, managing director and head of energy research at Dain Rauscher Wessels. "However, the expectation is that prices will be high enough to continue pushing stocks and activity higher. They all believe the oil patch recovery has started."

The fact that many in the industry are not bullish about prices in 2000 is an effect of the previous warm winters, Wicklund said. "We assume that the record warm winters seen over the past two years have made many of the participants somewhat cynical."

Yet, despite what others in the industry feel, Wicklund is a bull. "Overall, considering the very harsh operating environment the oil and gas industry has seen over the past 18 months and how weak the cyclical recovery has been so far, the consensus outlooks are actually very bullish."

Oil prices were predicted to retreat slightly from the current price of $24 per barrel to $22.70 by the end of this year with an average price for the year 2000 placed at $20.70. The poll also found that the vast majority of respondents believed that crude oil production would increase over the next year by an average of 2.7%.

The group also took a stab at the next merger candidates, answering that Chevron and Texaco were the "favorite pair for a successful marriage of oil companies." Nearly every oil company made the list, but those two companies were included in more than 15% of the survey responses.

John Norris

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