Energy Stocks Screening

 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

* Brent Oil price

mcf - hundreds cubic feet (North America, Henry Hub).

April 2013 Analysis major Oil and  Gas Companies stocks analysis: 

* 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.