Friday, May 15, 2015

Energy Stocks Screening

Energy Prices forecast
Energy price forecast until 2020
* Brent Oil price
mcf - hundreds cubic feet (North America, Henry Hub).  Inflation assumed at 2% a year.
May 2015 Analysis major Oil and  Gas Companies stocks analysis:
Energy companies benchmark. Big Oil at glance.
* Gazprom has big exposure to one country only - Russia
** proposed

It has to be noted that dividends  were paid when the oil price was $100 USB/bbl for Brent crude, while share prices dropped since then. This resulted in elevated % for all but Gazprom & Rsneft.
For an energy company the most vital source - it is the mineral base it has and the replacement ratio.  It depends 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 remaining resources:
Energy companies dividend income. Big Oil payouts.
 *ExxonMobil &  Chevron has approximately 20% of the booked reserves as shale gas. A lot of producers struggling to make any money, developing shale gas and oil. Shell  has about 10% reserves in it.
** BP is overexposed to USA and has potentially very expensive resolution in US courts for long time.  As an indication, the company was forced to pay over $ 1bn for study on the damage done, which BP is not allowed to see.  The company will be milked for a long time.

It is clear how big companies are trying to balance oil and gas production in the oil equivalent, making it always the same. There is several main drivers: hedge the risks, as with LNG market growing, the prices are getting exciding volatile and aggressive. At the moment this only noticeable on the balance sheets and  households in Asia.  In the long term Western Europe and USA will feel at as well, if decide to witch to LNG market, or their suppliers will. Difference between domestic natural gas prices in the USA and in Asia are four times.

Some people have conceived fallacy where that the USA and EU are perfect 10 with the rest of the world is zero on a legal sanctity rating scale. Former General Motors (GM) bond holders and Fannie Mae (FNMA) stock holders might argue whether the US is as legally pure as we like to believe.
The tens of billions of dollars being extracted out of financial institutions by the Department of Justice for alleged financial wrongs, especially since many were forced by the government to acquire the risky assets (Bank of America (BAC), Countrywide Credit, etc.), could arguably be described as a government “shakedown.” Yet very few are willing to equate this to what goes on in other countries and even fewer in the investment business seems to incorporate this sort of risk for U.S. companies in their investment decisions. BP unveiling story is another controversial example.
In 2007 ExxonMobil (XOM) had revenue 3.8x higher than Gazprom (OGZPY), net income 1.5x higher and a market cap 1.5x higher. I.E., their P/E multiple was THE SAME as Gazprom. Today, Exxon’s market capitalization is 5x higher than Gazprom’s, despite net income and free cash flow being are almost the same and dividends are 1.5x lower per share.
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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