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Wednesday AM December 13th, 2006

Purchasing and supply managers predict economic growth in 2007…CEOs expect slow but steady growth…Anadarko Petroleum to sell Venezuelan assets… National economic growth will continue in 2007, according to the nation’s purchasing and supply management executives, in their 72nd Semiannual Economic Forecast. The Institute for supply Management says expectations are high for both manufacturing and non-manufacturing […]


Purchasing and supply managers predict economic growth in 2007…CEOs expect slow but steady growth…Anadarko Petroleum to sell Venezuelan assets…

National economic growth will continue in 2007, according to the nation’s purchasing and supply management executives, in their 72nd Semiannual Economic Forecast. The Institute for supply Management says expectations are high for both manufacturing and non-manufacturing sectors, with both expecting revenue growth. Some 72 percent of survey respondents expect a 6.4 percent net increase in overall revenues, with chemical products expecting the greatest improvement, followed by transportation equipment, primary metals, food, beverage and tobacco products, computer and electronic products, miscellaneous manufacturing and electrical equipment, appliances and components. And 72 percent of non-manufacturing supply management executives also expect a 6.4 percent net increase in overall revenues. Mining expects the greatest improvement, followed by professional, scientific and technical services, wholesale trade, transportation and warehousing, educational services and information.

The nation’s CEOs expect the economy will grow slowly, but steadily in the first half of next year. Corporate leaders surveyed during the fourth quarter by the Business Roundtable are assuming the nation’s Gross National Product will expand at a 2.8 percent annual rate in the coming year. That’s down two-tenths percent from what they expected in the third quarter survey. They also expect little to no change in projected sales, capital spending and employment from the previous survey. For the fourth consecutive year, CEOs cite health care costs as the greatest cost pressure facing their businesses. Fifty-one percent say that’s their biggest concern–three times as many as cite the next greatest pressure–energy costs.

Employment in the oil and gas industry in Texas continues growing, according to the Texas Petro Index, produced monthly for the Texas Alliance of Energy Producers. But the index declined overall for the first time in four years. Alliance President Alex Mills says overall, oilfield service companies do well when drilling does well.

“The trickledown is, in the oil and gas business, really starts with the independent oil and gas producer and the major oil companies also. The independents drilled 96 percent of the wells in Texas in 2005, and produced 90 percent of the oil and 86 percent of the gas. The major oil companies are not as active in the exploration side of the business as they were many years ago. But they’re still active on the refining and marketing sector.”

For the month, oil gas support employment rose 11.3 percent from the same month in 2005.

“Employment in the Texas oil and gas industry has been growing for a number of years but, as of this year we’re up over 10,000 employees over last year. The service and supply sector are the people who are generally hired by the wildcatters in the extraction part of the business, and their employment has been leading the way because of, it’s quite a bit harder for the wildcatters to get qualified people in that side of the business.”

The decline was primarily due to reduced oil and natural gas prices compared to the previous month.

Houston-area-based Anadarko Petroleum plans to sell its Venezuelan assets, part of a deepwater Gulf of Mexico project and other holdings. The move by one of the nation’s largest independent energy exploration and production companies is a bid to erase a large chunk of its $26 billion debt. Anadarko finance chief Al Walker told an investor conference that the company’s goal is to get its debt down to $12 billion by the end of next year. The Woodlands-based company borrowed $22.5 billion in August to buy Kerr-McGee and Western Gas Resources. It immediately began to transform the new portfolio and reduce debt, primarily through divestitures.

Royal Dutch Shell has submitted a new offer to Gazprom on terms for the Russian natural gas company to join a liquified natural gas project on Sakhalin Island. Shell owns 55 percent of the project, and two Japanese companies own 25 and 20 percent stakes. Gazprom has been negotiating to joint the energy project with a stake of just over 25 percent. Since the summer, the Natural Resources Ministry and prosecutors have repeatedly threatened to revoke the Shell-led consortium’s ecological permit. Shell has offered to cede control of the project to Gazprom after enraging the Kremlin by announcing a doubling of project costs.

Britain signed on to commit to the next development and production phase of the new Joint Strike Fighter. That resolves a dispute between the pentagon and its biggest overseas partner over sharing technology for the advanced fighter jet. Britain’s arms procurement minister, Lord Peter Drayson, says the country hasn’t fully committed to buying the jets. But preliminary plans call for it to buy 150 of the Fort Worth-built fighters also known as the F-35. Britain already has invested $2 billion in the $276 billion defense program. But it had threatened to withdraw because of concerns the Pentagon wasn’t sharing enough information about sensitive software and other technology for the jet. The Joint Strike Fighter is expected to make its maiden flight this week in Texas. The fighter will be assembled at Lockheed Martin’s plant in Fort Worth.

When it comes to holiday sales, one expert says consumers are still a bit “behind the curve.” But things may be picking up. Michael Niemira with the International Council of Shopping Centers adds that anecdotes from malls this past weekend are more upbeat than some of the actual data. And he says the latest weekly “snapshot” shows sales are getting better. Stores are targeting lollygaggers with increased discounts. And online retailers are geared up for what could be one of their busiest days today, as the shipping deadline nears.

The government says the trade deficit dropped dramatically in October, to the lowest level in 14 months as the price of crude oil plunged by a record amount. The Commerce Department says there was a lot of disappearing red ink in the foreign trade books, with the deficit falling to $58.9 billion in October. That’s a decline of 8.4 percent from a deficit of $64.3 billion in September. The percentage drop is the biggest since December of 2001, and far more than analysts expected. It brings the monthly deficit down to the lowest level since August of 2005. The sharp decline reflects a record drop in oil prices. America’s foreign oil bill fell more than 17 percent in October. But the U.S. deficit with China rose by more than six percent to $24.4 billion, reflecting big increases in shipments of toys, games, sporting goods, televisions and computers in preparation for Christmas shopping.

Texas’ cotton crop is expected to be about one-third less than in 2005. That’s because drought slammed the state’s cotton fields. Ag officials say Texas is on track to harvest 5.7 million bales–the state’s fourth-largest crop ever. The 2006 cotton estimates were released by the U.S. Department of Agriculture and mirror last month’s numbers. Texas last year produced 8.5 million bales–or about 700,000 bales more than 2004. West Texas producer Rickey Bearden lost all 4,000 of his dryland cotton acres to drought. The lack of rain made his irrigated crop just average. Bearden says he’s considerably down from last year–and blames it on a lack of rainfall. Nationally, the cotton forecast calls for 21.3 million bales to be harvested. That’s down 11 percent from last year.

Credit Suisse affiliate DLJ Merchant Banking Partners has acquired Houston-based Total Safety U.S., according to the Houston Business Journal. Total Safety provides safety equipment and training to the refining, petrochemical, upstream and other industrial markets.

Fort Worth-based Crescent Real Estate Equities and an affiliate of General Electric Pension Trust have sold the 19-story Three Westlake Park on Westlake Park Boulevard. According to the Houston Business Journal, the 24-year-old property was purchased by an unnamed advisor to a real estate investor on December 11th for $87.3 million. The property is occupied by Amoco Production, ConocoPhillips and Exxon Mobil.

The Connecticut School of Broadcasting has opened a Houston facility on West Loop South. This is the school’s 16th location in eight states, and features studio space and professional-grade equipment, including radio studios, digital production studios, master control rooms, television studios and edit bays. The Boston-based school offers broadcast education in eight-week or 16-week programs. The Connecticut School of Broadcasting also teaches Internet broadcasting, podcasting, streaming video, radio and television sales and non-traditional production.

Sabre Holdings says it has a buyer. The Southlake-based travel-reservations system operator said it’s being acquired by private-equity groups for $4.5 billion–including debt assumptions. Fort Worth-based Texas Pacific Group and Silver Lake Partners say they’ll pay $32.75 per share in cash for the company, which connects airline, hotel and car-rental systems with travel agents. The price also includes $550 million in assumed debt. It’s a 30 percent premium over Sabre’s average closing price over the past 60 days. The deal would require approval by Sabre shareholders. Sabre Holdings said it doesn’t expect to make management changes and will remain based in the Fort Worth suburb of Southlake.

Texas Instruments has cut its profit and revenue forecast for the fourth quarter. TI is the leading maker of chips for cell phones. Dallas-based TI cited slower sales of semiconductors and warned that sales could weaken further early next year. Vice President Ron Slaymaker says such corrections typically last more than a single quarter. Texas Instruments also says semiconductor orders are likely to weaken again in the typically slower first quarter. But Slaymaker says there also appears to be less demand for end products that use semiconductors.

A Mississippi oil well services company has been drawn into an investors lawsuit filed in Houston. Warrior Energy Services and President Bill Jenkins are among eight people and companies 22 investors are suing. Members of St. James Capital Partners contend their investment managers used their money in recent years to enable the defendants “to enrich” themselves “at the expense of the partnership.” A spokesman for Columbus, Mississippi-based Warrior Energy says the charges against Jenkins and the company are false. The lawsuit seeks refunds of the money placed with the Investment Group, led by Chairman Charles Underbrink–plus other funds they claim to have lost. Defendants are St. James Capital, Underbrink, Jenkins, Warrior and others. St. James Capital Partners includes investors from Texas, California, Colorado, Wisconsin, Minnesota, Michigan, Illinois and Florida. The lawsuit is scheduled for trial in April in a Harris County State District Court.