Friday, May 25, 2012

Energy Stocks screening

I repeated the analysis conducted early in January 2012 of the main energy companies.  For an energy company there is  two main factors of prime importance:
- Amount of reserves it has (replenishment rate is always an uncertainty)
- Current cost of the reserves, i.e.  who much  the company investors have paid so far per barrel. This will give an indication of potential profit.

Major energy companies reserves vs current production rate. As you can see:
Cost per barrel of reserves - major oil and gas companies:

Reserves in Gazprom cost only $ 1 per barrel of oil equivalent and information that the Company adjusted its dividend policy for 2012, 2013, 2014 earlier last year.  For  2012 it is going to pay about $0.265 (8.5 RUB) per share - 2.9%.  Russia just entered WTO,  hence  it has to cut on  in country  energy prices subsidies. 
Current consumers natural gas prices in Russia  $150 per one thousand cubic meters,  in the USA it is  roughly $300 (depends on the area) while in the UK it could be as high $1500. According to news the price raise on 15% a year is anticipated. 

The energy sector is very much capital intensive and amount of dividends paid in a given year, cannot predict future pay outs. For example:
 The highest dividends were paid by Total for 2011.   The company has plans to increase CAPEX up to 20% or $3bn in 2012.  It is plausible to suggest that it will affect the payments.

Based on this analysis I bought 3000 Gazprom shares today,  worth about $25,000. 

Candidates for gamble are BP & ENI. BP has unresolved court in the USA, ENI operates in countries with unstable regimes and places. ENI the lowest OPEX per barrel and paid second high dividends for the previous year.  But crisis in Europe and potential Italy downgrade could affect ENI cost of borrowing.

This is NOT a financial advice, nor your should rely on the data.  Please seek independent professional advice for any financial movements /investments.

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