Energy
Prices forecast
2013
|
2014
|
2015
|
2016
|
2017
|
2018
|
|
Oil $/bbl*
|
107
|
100
|
100
|
100
|
102
|
107
|
Oil in
2012 prices $/bbl*
|
105
|
94
|
92
|
90
|
90
|
93
|
Gas $/mcf
|
3.06
|
4.25
|
4.5
|
5
|
5.4
|
6
|
mcf
- hundreds cubic feet (North America, Henry Hub).
* Gazprom
has big exposure to one country only - Russia
For an
energy company the most vital source - it is the mineral base it has and the
replacement ratio. In other words energy
company extracts resources and need continuously to find new ones. It
determines how long the company could
sustain its production at current rate. We cannot possible predict what the
replacement ratio is going to be tomorrow.
Biggest
energy companies ranked US/boe :
Company
|
Gazprom
|
Rosneft
|
BP
|
Conoco
Phillips
|
Statoil
|
ENI
|
Shell
|
Total
|
Exxon
Mobil
|
Chevron
|
Reserves,
years
|
31
|
30
|
22
|
27
|
22
|
23
|
26
|
21
|
27
|
25
|
Dividends
paid in 2012, %
|
5.07
|
1.71
|
5.27
|
4.47
|
3.7
|
4.5
|
5.2
|
5.9
|
2.55
|
3
|
US/boe
|
1.1
|
3.0
|
4.6
|
4.8
|
5.3
|
6.4
|
6.8
|
7.2
|
9.5
|
9.6
|
As you could
clearly see as the USA retains “AAA” rating, in terms of “US/boe” US companies equities cost the most, apart from “Conoco
Phillips” and “BP”. For me there is
really two main metrics: remaining
reserves and dividends paid.
There is
many other factors involved - type of operations, how much does it cost to
produce a unit for the company, etc.. but this is already factored in the
dividends paid. Should the oil prices go
down the company with the more expensive resources might lose the value quicker
than others.
Higher
US/boe (barrel of oil equivalent) reflects investors’ confidence in company
abilities to replace resources by the investors. Returns
from the energy sector stocks in 2012 have been poor. The S&P 500 oil and
gas producers index has underperformed the wider US market by 10 percentage
points this year; in Western Europe, a similar comparison shows a 20 per cent
shortfall.
Some of the energy
companies have bigger portion of their portfolio in natural gas, but almost all
companies pulled hard on their oil
reserves to benefit from the high oil prices:
Energy Company
|
Gazprom
|
Rosneft
|
BP
|
Conoco
Phillips
|
Statoil
|
ENI
|
Shell
|
Total
|
Exxon
Mobil
|
Chevron
|
% oil
reserves
|
11
|
83
|
58
|
52
|
52
|
49
|
44
|
54
|
46
|
53
|
% oil in
annual production
|
10
|
94
|
63
|
53
|
58
|
57
|
52
|
54
|
51
|
67
|
Looking at
the percentage some energy companies: Shell, ENI, ExxonMobil have more natural
gas in their portfolios than oil. For
them it could be a challenge to sustain revenue in short to medium term, should
natural gas prices remain low in the USA and no export permits granted to ship
LNG overseas.
Here is overall
energy stocks (equities) comparison summary:
Natural
selection would leave us with GazProm and ConocoPhillips. Two wild horses are Rosneft & BP.
BP has cheapest resources (US/boe) among diversified oil energy companies and good dividends, but low reserves (and
replacement ration in 2012 was way below expectations), as well as potential
liability in the USA, after the incident in Gulf of Mexico.
Rosneft has exceptionally strong
resource base and currently among the cheapest cost in terms of US/boe of
resourses. The government want to
demonstrate effectiveness of the state and in preparation for their stake sale
in coming years, dividends are likely to
improve and be at or around 4% .
ConocoPhillips is beating heavily
on production from Canada Oil Sands – this an expensive method extracting oil,
which meets some opposition from locals in the area, on
environmental concerns. More over it is not cheap, so makes the company
some sensitive to change in oil prices.
The choices are among GazProm,
ConocoPhillips, Rosneft. I have already some exposure to natural gas
and Gazprom, as part of my portfolio, following investment of last year bonus
in their stocks.
I was going to invest majority
of the last year savings into S&P500 ETF,
where ConocoPhillips already presented as well as Chevron &
ExxonMobil. I think I will invest my 2012
bonus into Rosneft (OJS1:FRA).
Note: This is not a financial or investment advice.
You need to look at personal circumstances and consult a registered
professional before making an investment decision.
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