Oil stocks are signaling that crude prices may rebound to a record in 2007

Nymex IPO
Energy-related IPOs raised $3.7 billion in the U.S. lastyear. Just three years ago, no energy companies went public.
Nymex sold its shares for more than underwriters forecast inits initial share offering, and they still jumped more than 125percent the next day on the New York Stock Exchange.
Oil has rallied for almost five years as fuel needs rose,especially from China, leading to record prices. Oil ended lastweek at about $60 a barrel. Natural gas prices peaked at over $14per million British thermal units in December, up from an averageof $2 during the 1990s.
Energy companies are selling shares to finance new projects,including Reliance Industries Ltd., owner of India'slargest refinery. Reliance sold stock in its Reliance PetroleumLtd. unit earlier this year, raising $601 million forconstruction of a 580,000 barrel-a-day refinery.
Buyers ordered 50 times more shares than were available,according to the underwriters. Reliance Petroleum shares surged42 percent after their first day of trading. They have since lost21 percent.
"Oil companies will continue to do well because there is alot of expansion needed both in exploration and refining,'' saidPraveen Martis, an energy analyst at U.K.-based Wood MackenzieConsultants Ltd. ``The energy story is far from over.''
Good Market
We are in a good oil and gas market and investors aretrying to take advantage of that,'' said David Frischkorn, amanaging partner at Dahlman Rose & Co., a New York-basedbrokerage that specializes in energy and shipping. ``Cash flowshave been very, very good and will continue to be good.''
Investors shouldn't mistake a good IPO performance forunderlying strength in an equity, said T. Rowe Price Group Inc.energy analyst Tim Parker, whose firm bought Nymex shares.
"It's more a function of investor enthusiasm thanfundamental strength,'' he said in a Nov. 21 interview.
Parker says oil prices will stay around today's level forabout a year and then begin to rise. He expects Russia and othercountries outside of OPEC to add 1.5 million barrels of crude oilproduction capacity next year, helping to meet ever-risingdemand.
By the end of next year, $60 crude will ``feel more like afloor than a ceiling,'' he said. ``It'll be difficult for non-OPEC supply to consistently meet demand growth.''
The increase in energy IPOs reflect confidence that enoughoil and gas can be found to exploit today's high prices, saidDaniel Yergin, chairman of energy consulting firm CambridgeEnergy Research Associates and author of ``The Prize,'' thePulitzer prize-winning history of the oil industry.
"This is a growth period as the industry rebounds from thecontraction it went through five or six years ago,'' he said.