To The Shores Of Tripoli?

By Gene G. Marcial

A Bubbling Crude
With a thaw heating up between Washington and Tripoli, is a Libya play lurking in the oil patch? Subash Chandra of investment firm Morgan Keegan (RF ) says Occidental Petroleum (OXY ) will be a big winner in what he expects will be warmer U.S.-Libya relations over the next 12 months. Libya pledged to scrap its weapons-of-mass-destruction plan and allow inspections. That has led to talk that the U.S. may lift current sanctions.

Occidental could be a "central player if relations normalize," says Chandra. Occidental was producing 45,000 barrels a day when it was ordered out in 1986. Libya wants access to U.S. capital and expertise to boost its reserves, estimated at 40 billion barrels. Some U.S. oil outfits, including OXY, have talked with Libya's National Oil Corp. about lifting Libya's oil output of 1.4 million barrels a day to 3 million by the end of the decade. Investment manager Louis Navellier, a bull on Occidental, says its reputation in other countries might help it get back into Libya. Outside the U.S., Occidental operates in Colombia, Ecuador, Oman, Pakistan, Qatar, Russia, United Arab Emirates, and Yemen. "I would be shocked if OXY were not one of of the finalists," he says. Chandra sees earnings of $4.24 and cash flow of $7.22 a share in 2003 and $4.82 and $7.85 (excluding Libyan operations), respectively, in 2004. OXY's stock is up from 32 in August to 43.35 on Feb. 4.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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