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OPEC helps spruce up tattered oil giants

Their corporate logos still lay claim to global assets that range from lonely oil rigs in the Arctic Circle to smelly petrochemical complexes along the Houston ship channel - from supertankers steaming through the Indian Ocean to the gas station down at the corner. But the power of the big, integrated oil companies has vastly diminished since the 1970s.

In recent years, oil and oil-service companies have been prone to corporate raids, mergers, layoffs, asset sales, and slashed earnings expectations. Behind it is one controlling factor: Oil prices, which rose inexorably in the 1970s, slid in the early '80s and then collapsed in 1986, plunging from $28 a barrel to the low teens.

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Now, however, the Organization of Petroleum Exporting Countries is trying to restore stability, and oil companies are beginning to look less like the pitiful giants they seemed to be throughout '86.

OPEC's production accord, which was announced early last week, caused a predictable - but not earthshaking - reaction in financial markets. Oil futures prices increased. Share prices of oil companies rose, and the Dow transportation index declined (in expectation of higher fuel costs).After a relatively quiet week of trading, the Dow Jones industrial averaged closed at 1,930.40, up 1.55 points in four trading sessions.

Oil analysts are cautiously optimistic.

``We've upgraded the oil stocks,'' says William L. Randol, senior petroleum analyst with First Boston Corporation, ``but we're not recommending them across the board.''

In fact, even before the new OPEC agreement was announced, oil and oil-service stocks had been rising in anticipation of improvement. In early December, for instance, Cyrus J. Lawrence Inc., which specializes in oil stock analysis, had buy recommendations out on Exxon, Royal Dutch, Shell Transport, Amerada Hess, Standard Oil, and USX (which, as the brokerage points out, should be called ``US Oil'' since energy will account for 88 percent of USX's operating income next year).

Oppenheimer & Co. has cited Halliburton, Schlumberger, Dresser Industries, and McDermott as best buys among oil-service stocks. And Value Line, though pessimistic on this sector in general, suggests consideration of Schlumberger, Halliburton, Dresser, and Helmerich & Payne ``for the three- to five-year pull.''

Mr. Randol of First Boston says the share prices of Exxon, Royal Dutch, British Petroleum, and Chevron have done fairly well in recent months as a contrarian play. Texaco and Occidental are two which have not yet moved up, he says.

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Frederick Leuffer of Cyrus Lawrence sees earnings improvement for the oils on his buy list but is particularly interested in USX. It is ``one of the best values in the energy group as measured by cash flow and discount to appraised value,'' he wrote in a recent analysis. ``We expect the stock to advance by 30 to 40 percent in the next 12 months, spurred by a major restructuring of operations, a possible takeover, and/or improvement in underlying fundamentals.''

In general, the oil industry is like a supertanker coming about in becalmed seas. OPEC aims to keep prices from crashing again, and while it will be difficult to accomplish this, it is at least trying.

Saudi King Fahd noted in a speech in his country on Thursday that $18 a barrel is ``not the maximum, but the price must not be less than $18.'' Given the kingdom's central role in OPEC, that kind of signal encourages oil analysts.

``I see a broad bottom forming near the $17 a barrel range,'' says Stephen A. Smith, international energy analyst with Data Resources Inc.

``The initial response [to the OPEC accord] is certainly favorable,'' says Daniel Yergin of Cambridge Energy Research Associates.

Platt's Oilgram News reports that one indication of market support was the sale last week of a cargo of Brent crude for February at $18 a barrel. Platt's points out that since its meeting in Brioni, Yugoslavia, last July OPEC has spent about 50 days in meetings to try to achieve the $17 to $19 a barrel ``desirable'' range. Now, it looks as if OPEC might make it.

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