DANA PETROLEUM: DRILLING FOR 1 BILLION BARRELS OF OIL

Wall Street energy - Oil stocks rally back to a higher close - UPDATE 3
NEW YORK (AFX) - Oil stocks rallied back from early losses Wednesday,
finishing the session with gains for all three indexes on the back of an
ExxonMobil upgrade and a positive outlook for the oil-services sector.
The Amex Oil Index rose 0.5% to close at 1,039 points, the Philadelphia Oil
Service Index gained 1.6% to 195.53 points, and the Amex Natural Gas Index added
0.3% to 412.48 points.
In analyst action, Banc of America Securities upgraded Exxon Mobil to buy
from neutral, with analyst Daniel Barcelo highlighting the blue-chip stock as a
"top pick" for 2006.
He cited relative valuation, continued strong return on capital employed and
a clearer outlook for production growth.
"We continue to see Exxon Mobil as the benchmark for operational performance
in the sector," Barcelo said in a note to clients. "On ROCE (return on capital
employed), Exxon Mobil continues to lead the industry and we see this leadership
sustained through our forecast period through 2009."
The stock, down 11% since reaching an all-time high of $65.96 on Sept. 22,
finished the day at $58.57, up 10 cents.
Barcelo also upgraded Statoil and Eni to buy but downgraded BG Group and
Norsk Hydro to neutral.
"BG's 60% premium to the sector appears excessive post-2006 as long-term
growth slows," he said. "In Norway, Hydro's 10% premium to Statoil is
unwarranted given Statoil's better growth (7% vs. 0%), ROCE (28% vs. 12%) and
higher asset quality."
U.S.-traded shares of Eni rose 81 cents to $145.69, while BG Group gained
$1.13 cents to a 52-week high of $53.59, Norsk Hydro rose $1.90 to $109.80 and
Statoil added 52 cents to $24.65.
Oil-service bellwethers Halliburton , Schlumberger and Baker Hughes
advanced, with Baker Hughes hitting a fresh 52-week intraday high of $64.96.
"The cycle of increases in drilling activity and revenues for the sector
continues with growth, impact, visibility and outlook among the best of any
industry segments," Banc of America Securities said.
However, swings lower in commodities prices could hurt the stocks in the
near term, Banc of America said.
"Oil going to $40 or natural gas hitting $7 could cause some capital
spending delays or deferrals depending on why and how quickly they are seen,"
the broker said. "Weather is a near-term issue as is the relative dynamic
balance of supply and demand increases."
February crude futures on the New York Mercantile Exchange settled Wednesday
at $63.42 a barrel, a 28-cent gain. Natural-gas futures fell to a five-month
low, surrendering 42.9 cents to $10.20 per million British thermal units.
The Energy Department will report weekly U.S. stockpiles data on Thursday, a
day later than usual due to the New Year's holiday. .

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