Special Focus on Independent Oil & Gas
Overall, we consider that the probability of one of the four “price positive” scenarios which would cause physical disruption to oil supplies taking place (see Table 2), is significant, but lower than one in four. In the event that one of these “price positive” scenarios does occur, the oil price upside is likely to be considerable.
By contrast, we are of the view that that the chance of one of the five “price negative” scenarios occurring is higher than one of the “price positive” scenarios but any absolute effect on the oil price will be lower, particularly if Saudi Arabia dampens the negative effect by lowering its production in response.
Our central forecast is that oil will continue to trade in the $100-120 per barrel range. However, we consider the risk to this forecast to be on the upside, rather than the downside, and believe that the trading strategies which are likely to be more correct are those that concentrate on the upside.
Summary
Given a combination of distressed NAVs across the sector, coupled with our assumption of the Brent oil price continuing to trade between US$100 and US$120 per bbl, with upside risk and delivery from near-term high impact exploration in East Africa (Tanzania) and pre-salt basinal West Africa (Namibia, Angola and Gabon), we believe the potential exists for a positive re-rating of the sector in early 2012.
However, in the absence of political clarity on the European debt crisis, investors’ aversion to risk may mean that they continue to shy away from the pure explorers that offer the exact quantum of upside they are seeking from the market, in favour of their cash-generative producing cousins.
About the Author
Andrew joined Westhouse Securities in 2011 and has over 15 years’ experience in the O&G sector, commencing his career as a Petroleum Engineer with Chevron and Kerr- McGee.
Andrew went on to join Cazenove in Equity Research, covering the European integrated oil sector, before moving into Corporate Finance where he has held positions in a variety of firms including PwC, Bridgewell Securities and City Capital Corporation.
Andrew is a Chartered Engineer, graduating from the University of Sheffield with a degree in Chemical Engineering and gaining a Ph.D in Chemical Engineering from Cambridge University.
You can contact Andrew directly at: T: +44 (0)20 7601 6129
andrew.matharu@
westhousesecurities.com
About Westhouse Securities
Westhouse Securities is a corporate and institutional stockbroking group with particular sectoral expertise in natural resources, investment funds, UK industrial and environmental technology. Regionally the Group's clients have significant exposure in Europe, Africa, Central Asia and China.
Through its division Smith's Corporate Advisory, Westhouse has a strong focus on widening share ownership for quoted companies of all sizes. In January 2012 Westhouse acquired Arbuthnot Securities and the two businesses were fully integrated. The Company continues to exploit opportunities in overseas markets through its strategic alliance with Agile Partners, based in Beijing, and through close working relationships with a number of other advisory businesses worldwide.
To learn more please visit:
http://westhousesecurities.com/index.asp
Drillers and Dealers :::
::: February 2012 Edition
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62