BUSINESSWEEK ONLINE : DECEMBER 11, 2000 ISSUE
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET Mitchell Burns Hot Arnold Schmeidler is high on ''big-picture theme investing,'' which has produced compounded yearly returns of 25% for his portfolio for three years. His current top pick is Mitchell Energy & Development (MND) for two reasons: ''It is a very attractive play on the sizzling demand for gas, and we expect one of the majors will end up buying Mitchell,'' says the president of A.R. Schmeidler, which manages some $500 million. Mitchell is a major independent producer of natural gas and gas liquids--used to produce propane, butane, and ethane. ''Mitchell is well-positioned to benefit from the long-term strength of natural gas,'' says Schmeidler. Prices have jumped from $4.50 per 1,000 cu. ft. in the third quarter to around $6.25 now. Schmeidler notes that for every 10 cents jump in the price of gas, Mitchell's earnings rise by $5.3 million, or 10 cents a share. Mitchell's gas output this year, he says, exceeded 335 billion cu. ft. a day, up 36% from a year ago. Proven reserves as of July had jumped 45%, to 1.5 trillion cu. ft., from a year ago. So Mitchell, he says, doesn't have to undertake any wildcat exploration, since the life of proven reserves runs up to more than 12 years. Based on earnings and cash flow, Schmeidler figures Mitchell, now at 48 3/4, is worth 75 to 80. Mitchell posted earnings of $1.38 a share in the third quarter, vs. 53 cents a year ago. For 2001, he sees Mitchell earning well over $5 a share, up from 2000's estimated $4.75 and 1999's $1.64. And he sees 2001 cash flow per share at $10, up from 2000's $8.68, and 1999's $4.50. Schmeidler notes that CEO George Mitchell, 82, owns 57% of the stock. ''At some point, we think Mitchell will opt to sell the company, or merge it with the likes of Exxon Mobil or Phillips Petroleum,'' says Schmeidler. BY GENE G. MARCIAL _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Mitchell Burns Hot CHART: The Stock Is Sizzling INTERACT E-Mail to Business Week Online

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