The dramatic and long-awaited upturn in E&P stocks, fueled last March by OPEC's production agreement, ended with a bang in September and ever since, most of these stocks have languished. It looks to be more than just profit-taking. "[This] has now reached disquieting proportions, conjuring up memories (nightmares?) of the group's precipitous decline in late 1998/early 1999...," says analyst Paul Leibman at Petrie Parkman & Co. in a recent report. Seven of the E&P secondary offerings made in 1999 are "under water." Why? He cites several factors. As oil prices peaked last fall, investors failed to believe that these high prices were sustainable, and they believed that E&P stocks had had all the run-up that was possible. In particular, since late August, gas prices have declined significantly, also affecting gas-oriented stocks. One can also point to the bickering between the UN and Iraq, which moves oil prices up and down on a daily basis, adding uncertainty for investors. But in any case, Leibman says the traditional connection between commodity prices and stock prices appears to have broken down. "This has fostered a 'rent-versus-own' mentality in which E&P stocks are perceived as trading vehicles as opposed to long-term investments capable of adding appreciable increments to shareholder value...." Investors are much more likely to follow the hotter technology sector, a sector that continues to shower them with strong appreciation, says C. Van Levy, E&P analyst for CIBC Oppenheimer. He recently joined the firm's Houston energy team from Jefferies & Co. Looking to find values in the E&P sector is David C. Bradshaw of Donaldson, Lufkin & Jenrette. "Search as we might-like the relocated Okie on the warpath for credible chicken fried steak in Manhattan-we remain unable to find evidence to dissuade us from our position that investors have a sterling occasion to take advantage of one of the most compelling opportunities witnessed for E&P stocks in some time," he wrote in November. That opinion has not changed. "We believe the longer-term risk/reward profile for this group is quite favorable," adds Bob Morris of PaineWebber Inc. He says the stocks are cheap as ever, but looking for some kind of catalyst. So far, colder winter weather does not appear to be an answer. -Leslie Haines