Video: Oil drillers may see another good year

By Melissa Francis Reporter
updated 12/29/2003 1:58:43 PM ET 2003-12-29T18:58:43

Drillers struck gold in 2003 as crude oil prices shot up 30 percent and natural gas prices soared roughly 50 percent. And industry analysts say as 2004 gets underway, the ride isn't over yet.

In the past, OPEC has increased supply when prices push up toward $30 a barrel. But not this time, says A.G. Edwards' Bill O'Grady.

"Now they are saying that the dollar is weak enough that they are less inclined to do that so that one factor that was keeping a lid on oil prices it kind of suggests the lid may be higher than we thought."

That's bad news for Americans at the pump, but good news for integrated oil companies if they can drive more volume to market. Exxon Mobil could dazzle Wall Street by boosting production by 5 percent in 2004, according to Banc of America's Tyler Dann.

"When you couple that with a very solid balance sheet, strong levels of share repurchases that will be continuing going forward and the good commodity price environment, we think it's worth buying here," Dann said.

Oil service companies like Schlumberger stand to impress investors with more drilling activity this coming year -- both in oil and natural gas. Though more natural gas drilling may not lead to more supply. That's because in the traditional drilling areas in the U.S., there isn't much natural gas left in the ground to extract.

"We've seen a very large increase in drilling activity in this county, and despite that fact, estimates still indicate that production is down anyhwere from 2 percent to 4 percent," O'Grady siad. "That's pretty frightening."

And once again, in 2004 some are betting that energy prices will finally fall. But with so many variables -- from Iraq to the weather -- there are plenty of investors willing to take the other side of the gamble.

© 2011 MSNBC Interactive

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