ENERGY/FOREIGN INVESTORS

  Lured by the weakening dollar and the
  conviction that oil prices are poised for a rebound, European
  energy companies are buying up cheap U.S. oil and gas reserves
  to replenish their supplies, oil industry analysts said.
      They said owning oil reserves in a politically stable
  United States is good insurance against future shortages.
  However, the quick pace of foreign investment has heated up
  competition among European firms, well-heeled U.S.
  institutional investors and major oil companies to snare choice
  domestic oil properties.
      Strevig and Associates, a Houston firm that tracks oil and
  gas reserve sales, said growing interest among foreign buyers
  had helped push reserve prices in recent months higher. All
  buyers of U.S. reserves paid a median price of 6.45 dlrs a
  barrel of oil during the fourth quarter of 1986 for
  acquisitions, up from 5.33 dlrs in the third quarter and five
  dlrs in the second quarter, according to the firm's research.
      "Foreign investors have been here nibbling a long time, but
  we're seeing new names and smaller companies coming in," said
  Arthur Smith, an oil property appraisal specialist and
  president of John S. Herold Inc in Greenwich, Conn.
      "Europeans, especially, do not have much indigenous oil and
  gas and realize the tide will eventually turn in favor of the
  Organization of Petroleum Exporting Countries," he added.
      Smith and other oil industry analyst and economists believe
  the trend in foreign investments will continue in 1987 because
  of the fall in value of the U.S. dollar, the perception that
  oil prices have hit bottom and the fact that it is cheaper to
  buy new reserves than to explore for them.
      Plenty of properties are available on the market, thanks to
  the need of many companies to raise cash for debt payments and
  general restructuring throughout the oilpatch.
      In two of the biggest transactions of recent months,
  French-owned Minatome Corp., a unit of &lt;Total Compagnie
  Francaise des Petroles>, spent more than 230 mln dlrs to
  separately acquire oil assets of Texas International &lt;TEICC>
  and Lear Petroleum Partners &lt;LPP>. A spokesman for Minatome
  said the company is searching for additional acquisitions.
      A partnership of two Belgian-owned firms, &lt;Petrofina S.A.>
  and &lt;Cometra Oil S.A.> paid 150 mln dlrs late last year to buy
  virtually all the exploration assets of the Williams Cos &lt;WMB>,
  the Oklahoma pipeline firm.
      But Japanese investors prefer entering into joint ventures
  with experienced U.S. companies to explore for new oil. Japan's
  &lt;Nippon Oil> is a partner of Texaco Inc's &lt;TX> Texaco USA in a
  100 mln dlrs U.S. drilling program, and has joined with
  Dupont's &lt;DD> Conoco Inc in a similar 135 dlrs mln deal.
      Most buyers said the pay-back period of a property, its
  geographic location and the lifting cost of the crude oil are
  more important factors in evaluating potential acquisitions
  than relying on a simple price-per-barrel formula.
      Rich Hodges, a Houston-based land manager representing
  International Oil and Gas Corp, a partnership of &lt;Preussag
  Corp> and &lt;C. Deilmann Inc> of West Germany, said the firm had
  earmarked at least 50 mln dlrs to spend on oil reserves in
  Texas, Oklahoma or Louisiana in the coming months.
      But he called that a small amount compared to the amount
  other investors have for acquisitions. PaineWebber's Geodyne
  Energy Income Fund, for example, has said it plans to spend up
  to 300 mln dlrs on oil and gas properties.
      "The competition is stiff, not only from other foreign
  investors but from the brokerage houses and U.S. oil
  companies," he said. "Our company is shopping around because we
  feel it's substantially less risky than pure exploration. If
  you're going to take the risk inherent in exploration, you need
  prices higher than the current market," he added.
      In addition to the foreign investors and U.S. brokerage
  houses, analysts said many of the major oil companies were also
  competing for prime properties.
      Houston-based Shell Oil Co, a unit of Royal Dutch/Shell Group
  &lt;RD>, has been one of the most active companies in buying and
  selling reserves, Smith said. Since 1982, Shell has acquired
  two billion dlrs in new reserves, including 470 mln barrels of
  oil equivalent at a net cost of 2.80 dlrs a barrel, he said.
      "Buying reserves is a good strategy for most of these
  companies," Smith said. "Domestic production has dropped by one
  mln barrels a day because of cutbacks in drilling and it may
  drop by another one mln barrels a day in 1988."
  

