And We're Off!
...the oil industry ride begins

by Brian Graney (TMFPanic@aol.com)

ALEXANDRIA, VA (Nov. 10, 1998) -- Fasten your seatbelts, Fools.

Today marks the start of the Drip Port's next industry study. But first a warning: This will not be a roller-coaster ride. In fact, it will probably progress at a rate mimicking the progress of that caterpillar-treaded contraption that moves the Space Shuttle to the launching pad. You know, the thing that takes hours to cover a stretch of just a few miles. This will be a slow process. Do not expect the launching of a new investment soon.

So, let's get started. The Fool asked for the name of the next industry to study, and The Foolish People (that's you, and we consider ourselves a part of the Foolish People, too, of course) have responded with a resounding statement of their wishes:

Bring us energy or bring us death.

Okay, maybe the response wasn't quite that dramatic. But The Foolish People (including you) have answered nonetheless. We aim to please around here, so we will start our study with a look at the much requested oil and gas industry. After we acquire a decent knowledge of this area, we will move on and study the rapidly-changing world of power producers and utilities. This will be quite an endeavor. We can't promise anything, except that we will do our utmost to keep things as Foolish as possible. Hopefully, we will all learn a few things along the way.

Allow me to say that you, The Foolish People, have picked a doozie. Perhaps no other industry in the world has as many different variables to consider from an investment standpoint as the oil and gas business. Thierry Desmarest, the chairman and CEO of French integrated oil and gas firm Total (NYSE: TOT), probably summed up the situation much better than this mere Fool ever could. "The oil market is a really strange animal," he recently told Barron's. "Where else do you find a market influenced by climate, politics, and economics?"

World politics and international economics are crucially important in the oil and gas business, since both demand and supply exist worldwide without regard to such trivial matters as national borders and government ideology. Of course, considering international issues is nothing new to veteran Drip Port readers. Two of our holdings, Intel (Nasdaq: INTC) and Johnson & Johnson (NYSE: JNJ), derive significant amounts of their annual sales from overseas markets.

However, the extent to which the international scene affects the major integrated oil companies' financial performance warrants additional considerations above and beyond what we would typically allot to other firms falling under the U.S. multinational corporation species gigantus americanus. With that in mind, we will be broadening our minds in the coming months to examine issues not just here in the good old U.S. of A., but around the globe as well. With so much of the oil and gas industry's future tied to overseas operations, we have no choice but to become familiar with such distant locales as Colombia, China, and the Caspian Sea region.

In other words, this study will be the first truly international analysis in the Motley Fool's history. And speaking of history, that's just the area of the oil patch into which we will dive first. Over the next few days, we will begin exploring the history of our chosen industry, from the first oil derricks in Pennsylvania in the 19th century all the way up to today's multi-billion dollar joint ventures for tapping reserves off the shores of Russia's Sakhalin Island. Sounds like fun, right?

Yes! It will be, actually.

Remember, this is going to be a long study and every nugget of incremental information that we can uncover about the industry will benefit us down the road when we consider our ultimate investing decision. Mostly, we are interested in where the industry is going, rather than where it has been. But like driving a car, it's not a terrible idea to take a quick glance in the rear-view mirror before pulling onto the stock analysis expressway.

After our quick history lesson, we plan to move on and look at the different roles that international politics, economics, and the commodity markets play in the oil and gas industry as we know it today. We will do our best to keep this Foolish roller coaster moving! Even if we're just moving at a crawl.

Tomorrow we'll delve into history, and we'll share our tweaked list of final companies to study per your ongoing suggestions. Until then, see you on the message board.

FoolWatch -- It's what's going on at the Fool today.


11/10/98 Close

Stock Close Change CPB 55 13/16 - 1/16 INTC 97 9/16 +1 9/16 JNJ 83 5/16 +1 5/8 MEL 60 1/4 -1 5/16
Day Month Year History Drip 0.95% 5.82% 23.36% 5.06% S&P 500 (0.17%) 2.69% 16.26% 18.59% Nasdaq 0.25% 5.32% 18.80% 17.05% Last Rec'd Total # Security In At Current 09/02/98 8.027 CPB $52.867 $55.813 09/01/98 9.727 INTC $80.238 $97.563 10/07/98 7.850 JNJ $71.405 $83.313 10/07/98 1.000 MEL $48.560 $60.250 Last Rec'd Total # Security In At Value Change 09/02/98 8.027 CPB $424.36 $448.01 $23.65 09/01/98 9.727 INTC $780.50 $949.02 $168.52 10/07/98 7.850 JNJ $560.53 $654.00 $93.48 10/07/98 1.000 MEL $48.56 $60.25 $11.69 Base: $2100.00 Cash: $237.52** Total: $2348.80

The Drip Portfolio has been divided into 89.430 shares with an average purchase price of $23.482 per share.

The portfolio began with $500 on July 28, 1997, adds $100 on the 1st of every month, and the goal is to have $150,000 in stock by August of the year 2017.

**Transactions in progress:
10/24/98: Sent $40 to buy more INTC.
10/26/98: Sending $60 to buy more JNJ.