Increased reserves-reporting guidelines and investors still feeling burned by the likes of Shell Oil and El Paso may have made E&P companies more cautious about pre-reporting guidance updates, and "this could increase the potential for surprises on the production and cost lines...," says JP Morgan analyst Shannon Nome. Meanwhile, the first-quarter reports trickled in. Paul Sankey, an analyst at Deutsche Bank, says, "Upstream earnings should be good, but once again we are left scratching our heads over refining and marketing earnings. For those who ran all-out, such as Marathon once again at close to 100% utilization, sophisticated refining margins are strong." Sankey names ConocoPhillips as his top pick, "which is cheap on almost every measure...." He points to Amerada Hess as his top value and exploration play. Nome says, "On average, our latest round of earnings and cash-flow revisions were relatively slight, based mostly on the mark-to-market of actual commodity prices and other minor company-specific items. Our first-quarter estimates are currently running 3% above First Call consensus." Nome's most significant upward earnings revisions were for Swift Energy, 14%; Stone Energy, 17%; and Apache Corp., up 6%, each due to increased crude oil exposure and reduced hedges.

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