C.K. Cooper analyst Philip J. McPherson warns that these high commodity prices shouldn't make too many oil and gas prospects beauty-pageant material. "The point being that in this price environment, every prospect is viewed as a winner and potentially the next trillion cubic feet of gas just around the corner. Realistically, investors should be wary of companies changing their risk profiles and rolling the dice looking for higher-risk/higher-reward-type projects," McPherson says. Irvine, California-based investment-banking firm C.K. Cooper covers small-cap E&P companies. "Although these higher commodity prices are an exceptional compliment for great management, they can also lead a bad management team astray, taking unneeded risks, with the consequences usually borne by investors." The "low-hanging fruit" have already been harvested, he says. "Going forward, it will be more expensive and require more risk to find smaller amounts of oil and gas than previously." Investors should consider management's appetite for risk very carefully. "We continue to believe that companies with a good story, solid cash flow, and management that looks at every opportunity as one piece of the puzzle-and not the entire puzzle-will prosper and continue to build shareholder value." McPherson attended NAPE 2003 Expo in Houston in January. "Given that both oil and gas is trading at or near 52-week highs, everyone had something to talk about." While in Houston, he and C.K. Cooper colleagues met with directors of E&P companies the firm does not presently cover. Several have "intriguing stories," he says, and may be added to the firm's coverage. -A&D Watch