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Eight analysts and top management from sixty-six sector firms examine the Suntrust Robinson Humphrey 31st Annual Institutional Conference in this special 247-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info526.htm

TWST: What do you see as the wild cards involved in the pricing dynamic? What scenarios do those wild cards suggest?

Mr. Escott: The base-case fundamentals for what will influence the price of energy in the next 12 months will be economic activity, which is world demand. If world economies can really improve and if OPEC remains relatively disciplined with their approach toward supply, then the supply/demand balance should steadily tighten throughout the year. From that, inventories should be reduced and the pressure on pricing should be upward and not downward. Let’s take the price of oil right now at $26. I would sense that oil prices could remain in the mid- to high $20s. We may ultimately see them go back to the $28 or $30 level. Natural gas is currently $3.50. As gas supplies come down and demand goes up, the price of natural gas could be $3.50-$4.50 per thousand cubic feet. That’s the base case. As to the wild cards, one is if we have a double-dip world recession. There is some speculation that we may have a second dip. I don’t subscribe to that, but if we do, I would call that a wild card. If there’s a major banking crisis in Japan, or if there’s a further significant economic dislocation in Latin America, a currency crisis in Brazil and Argentina, I would call that another wild card — which would be negative. On the flip side, I think the most visible wild card right now is the Middle East powder keg, specifically in Israel. They don’t produce a drop of oil in Israel — but all the oil is around Israel. If that situation in Israel does catapult out of control — not that what we have today is control — if it spins out of control in that region and spills over to a military conflict in the nations surrounding Israel, where all the oil comes from, that’s a huge wild card. The Arab nations surrounding Israel could punish the US and Israel, as they did in 1973, and cause a dislocation in the supply of oil. Looking at the terrorist acts that happened in the US and the events that are now happening in Israel, if these same terrorist events were to take place in the oil fields themselves, that would really shut down the flow of oil in Saudi Arabia or in the other major oil-producing provinces. That’s a wild card that changes the balance here, as well. That’s one of the reasons the stocks are as strong as they have been. Some people have been using this as a quasi-insurance policy about events in the Middle East getting worse before they get better. A barrel from Saudi Arabia, ultimately, really is the same as a barrel from Brazil or the US or Canada — a fungible commodity that travels all over the world. Since OPEC supplies a third of the world’s oil, they’re the swing producer. They have all the incremental production in the world, and their decisions and their influences really do directly affect Europe, Asia and all the other producing nations — Russia, as well. The OPEC members and the OPEC production are absolutely crucial.

TWST: Within that environment, are there any sector plays or segment plays that come to mind? Or do you back up and look at where the cycle is and which companies should perform based on the cycle and where they stand within that cycle?

Mr. Escott: More the latter. We do a lot of cycle work for the industry overall and, at this point, we judge the up cycle in these stocks typically as two to three years long, and we believe that we are in the early stages of the upward leg. We’ve finished the seventh major decline in 30 years, and we are now in the early part of this next upward leg. At that point in the early part of an oilfield cycle, the stocks that act the best tend to be the direct drilling-related ones — contract drillers and drilling-related companies selling products and supplies directly to the drillers. Related to those drillers we can include drilling-rig equipment, with National-Oilwell (NYSE:NOI) being one of our favorite names there. National-Oilwell is the largest manufacturer of drilling-rig equipment in the world. They have over 90% market share on many of these offshore rigs all around the world — and for mud pumps, draw works and some of these critical drilling components, they have over a 90% share.

This special conference issue includes:

1) Healthcare Services - In an in-depth (3,900 words) Analyst Interview, Darren Lehrich, Vice President and Equity Research Analyst covering healthcare services companies at SunTrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

2) Outlook for Cable TV - In an in-depth (1,700 words) Analyst Interview, Gary A. Farber, Senior Vice President of SunTrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

3) Hardline Retailing - In an in-depth (x,x00 words) Analyst Interview, David A. Schick, member in Equity Research covering the retail industry at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

4) Wireless Communications - In an in-depth (2,200 words) Analyst Interview, Jason Bell, Vice President at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

5) Outlook for Supply Chain Software - In an in-depth (3,100 words) Analyst Interview, Christopher W. Rowen, Vice President at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

6) Outlook for Regional Banks - In an in-depth (3,600 words) Analyst Interview, Christopher W. Marinac, Managing Director at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

7) Quantitative Research - In an in-depth (3,200 words) Analyst Interview, Gary W. Tapp, Senior Vice President in the Equity Research Department at Suntrust Robinson Humphrey, examines the outlook for the sector and shares specific stock recommendations.

8) CEO interviews (average 2,500 words). Top management of sixty-six sector firms examine the outlook for their firm and the sector.