With a weather-related supply disruption or a cold winter the only foreseeable events likely to drain gas supply and normalize the price, oil-weighted and balanced companies continue to be favored by analysts, according to John P. Herrlin, an E&P analyst with Merrill Lynch in New York. He recently upgraded Nexen Inc. to Buy from Neutral and increased his price targets for Chevron Corp. 15% and Hess Corp. 26%, bringing his universe to 10 Buy-rated stocks out of 29, up from six just five months ago. All three recently upgraded companies have an above-average leverage to oil, he notes. "For well over a year-almost two-we've espoused an investment thesis which has emphasized oil leverage-U.S. integrateds or select independents-or balanced companies-a more even mix of oil and natural gas production-free cash flow, solid management teams, visible production growth and good balance sheets," Herrlin says. "Historically, we've liked the insularity of North American natural gas, but viewed the current inventories and industry activity to be problematic for operating-margin contraction. We've been 'whiney bears' on natural gas since third-quarter 2005, and remain sidelined." For more on this, see the August issue of Oil and Gas Investor. For a subscription, call 713-260-6441.