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Top oil expert comes to roost here


In the wildly unpredictable oil industry -- which has seen prices skyrocket in anticipation of a Middle East war, then plummet as soon as shots were fired -- Adam Sieminski has built a reputation as a calm, clearsighted prognosticator.

But even he did not predict that a Hong Kong-based bank would buy most of NatWest's Washington-based research division -- and its office lease -- this summer. So Mr. Sieminski and his two fellow oil analysts, who wanted to stick with NatWest, landed in the company's next-closest office: Baltimore, a city never previously known as an oil-industry mecca.

Now, from a 20th-floor office in the World Trade Center overlooking the Inner Harbor, Mr. Sieminski runs the only oil industry analysis office in Baltimore that directly sells its information to investors.

Although the city has plenty of stock analysts at Alex. Brown & Sons Inc., Legg Mason, and other Baltimore-based brokerages, none here follow the oil industry. And while at least two mutual fund companies -- T. Rowe Price and Petroleum & Resources Corp. -- maintain oil analysts, they keep their recommendations to themselves.

But don't cash in your savings bond for an oil investment. NatWest's oil analysts don't sell their tips to average investors.

The British-owned stock brokerage focuses on big institutional investors and individuals willing to risk millions of dollars on its recommendations.

What those rich investors get are some of the most accurate predictions available about a notoriously erratic industry.

Earlier this year, a Wall Street Journal study found NatWest's earnings predictions for big oil companies were so close to target that they were among the five most accurate of the 30 biggest analysis groups last year.

And Mr. Sieminski's customers say he's also one of the best predictors of what will happen in Washington and the Middle East to affect the oil industry.

"He's got good contacts in the Saudi Embassy and in the Department of Energy," said Charles Ober, a long time client and co-manager of T. Rowe Price's New Era Fund.

Mr. Ober, who has helped manage the Baltimore-based natural resource-focused mutual fund for more than a decade, said accurate information on government actions and the intentions of the Organization of Oil Exporting Countries is key to successful investing.

That doesn't mean Mr. Ober thinks NatWest is always right, however.

These days, for example. Mr. Ober is ignoring NatWest's advice and buying up shares of Arco stock. He's also betting that oil prices, currently hovering around $18 a barrel, will remain steady for the next year or two.

NatWest's reports have been touting Exxon and Mobil shares as the best buys in the industry, and predicting that oil prices will head upward through next year.

Mr. Sieminski, a soft-spoken 48-year-old, good naturedly shrugs off such disagreements.

After all, he likes to question conventional wisdom. Of course, he tends to focus on the times he was right, such as in late 1993, when he disagreed with the general consensus that oil prices would remain around $12 to $13 a barrel; or in late 1994 when he and his staff recommended that Exxon shares, then trading in the high $50s, were a good buy. Exxon is now trading above $70 a share.

And Mr. Sieminski is betting the move to Baltimore will be another convention-breaking winner.

Until now, oil analysts have tended to work out of New York, or, like Legg Mason's oil analysts, from cities near the oil fields on the Gulf Coast.

But three months into the Baltimore experiment, the NatWest gamble seems to be working.

What with telephones, fax machines, computers and the like, "Wall Street is increasingly willing to let people have offices outside" of New York, Mr. Sieminski said.

And if he's going to be outside of New York, he may as well be somewhere convenient to his Washington home and sources.

"It makes as much sense to be in Baltimore as New York," he said.

He doesn't spend much time in the office anyway. He figures he spends about one day a week in Washington meeting with sources in government.

Another day or two he travels to meet oil industry executives and client investors.

The rest of his time is divided among researching, writing, and telephone conversations with clients or NatWest salespeople.

The office here is working out so well NatWest is expanding its local operation, though not its staff. The analysts here are adding coverage of four international oil companies to their current stable of the big six U.S.-based companies.

And besides their regular updates on news events and stock recommendations, they're gearing up to send their customers a new biweekly update on Washington "Oil Policy Perspectives."

It's a hectic life, and one that wears many analysts out. But Mr. Sieminski says he still enjoys everything from the daily 7:30 a.m. conference call to brokers, to the road trips that can take him to three cities a day.

"It is kind of fun," he said.

And although the industry is notorious for its long hours, NatWest's office numbers-cruncher and stock-picker, Holly R. Gustafson, has worked out a schedule that allows her to drop her daughter off at school in the mornings, pick her up in the afternoons, and work at home one day a week.

And while some might consider writing analyses of energy regulations and oil company financial statements mind-numbingly dull, the staff try to jazz up their reports.

Jennifer Weinstein, two years out of University of Maryland at College Park, has just put the finishing touches on a report entitled "Adieu Caribou."

Her prediction? The federal government will eventually allow companies to drill for oil in an Alaskan wildlife refuge -- thus increasing the world' oil supply -- despite environmentalists' concerns that drilling there could hurt the caribou population.

Oil investments

Here's what Holly Gustafson, the stock picker in the three-person NatWest Securities oil analysis office, is recommending to her clients:

"Mobil and Exxon are our buys.

"Mobil is going through a major restructuring, letting a lot of people go. Mobil is well diversified geographically. They are well-established in Japanand the Pacific Rim. That's good because places like Thailand are going like crazy.

"Exxon is just a stellar performer. You could buy it and stick it in your kids' trust funds.

"Our next rating down is 'add' or 'accumulate,' which means buy on weakness.

"About six months ago we upgraded Arco to 'add.' There is a lot of risk involved with Arco. They are heavily reliant on Alaskan crude. They have got to diversify into the foreign arena. The company has a lot of debt, but a lot of cash. They need to do something with their cash. They are negotiating now for an acquisition in the North Sea."

"I like Amoco now, too, but I didn't use to. They had a very poor record of finding oil and gas. But now they are in the process of significantly restructuring. They have severely reduced expenditures, and they are starting to see a better success ratio. They could turn this company around. But they are new players in the foreign arena, which is a negative because that's where the growth is."

"We recently downgraded Chevron to a 'hold.' They are having severe problems with their reserves in Kazakhstan. They can't get the oil out. There's no pipeline. Everybody is having problems with Russia, and that's putting a damper on Chevron. They've also had a lot of problems with their operations in the U.S., fires, explosionsAnd they are very sensitive to the chemical industry, which we expect to turn down."

"We're most bearish, in the near term, on Texaco. They have very high debt levels, and a lot of exposure in Europe, which has a lot of overcapacity."

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