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Invest in oil? Or invest in gas? Ask AmeraTex Energy
 

Invest in oil? Or invest in gas? Ask AmeraTex Energy

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There are investment opportunities in both, but finding your edge in oil is a lot easier than in natural gas, right now.

There are investment opportunities in both, but finding your edge in oil is a lot easier than in natural gas, right now.

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    Invest in oil? Or invest in gas? Ask AmeraTex Energy Invest in oil? Or invest in gas? Ask AmeraTex Energy Document Transcript

    • Invest in oil? Or invest in gas?There are investment opportunities in both, but finding your edge in oil is a lot easier than in naturalgas, right now.In a domestic energy market developing faster than just about anyone can remember, the key forinvestors is in finding an edge.Thats not easy in a natural gas market bloated with inventory. But oil is a different story. Thosedomestic oil companies innovating new schemes to get their product to market or pulling more oil fromthe ground are at the leading edge of Americas energy renaissance."Oil is growing faster in the U.S. than it has in 20 years," says Dahlman Rose & Co. analyst Nicholas Pope."The pipelines cant keep up.""Youd be hard pressed to find a time when more pipeline was laid in the U.S. than in the last fouryears," he said.And in the meantime, one way of gaining an edge has been using other means of transport."Continental Resources has been better at the logistics of moving oil. As an early entrant to the Bakken"— the rock formation in Montana and North Dakota producing hundreds of millions of barrels of oil —
    • "it has done a great job," Pope said. One key has been an embrace of rail transport, by whichContinental moves half of its oil.Whiting Petroleum is another Bakken producer Pope likes. "They got off to a slower start, but havegotten more aggressive in the past year," in part by using rail, he said.A Citigroup report from earlier this month estimated that over half the North Dakota crude production— of 480,000 barrels a day at the end of 2012 — was moved by rail. The same report said U.S. oil andgas production is developing so fast that energy independence (with a little help from Canada) is withinsight.Both Continental and Whiting reported earnings Wednesday that surpassed Wall Street forecasts. OnThursday, Stifel raised its price target for Continental to $90 from $83, which closed at $85.81 Friday.Elsewhere, oilfield services supplier Superior Energys stock was on the rise this week after reportingearnings Tuesday, as was Western Refinings after reporting Thursday.AIS Group money manager John Hummel sees the price of oil being inexorably on an upward trajectoryover the long run, with new demand from China and India, among others, far outstripping newlydiscovered supply."We feel oil prices are headed much higher," Hummel said. "Opportunities are in those companies withthe proprietary advanced technology to get more oil out of new and existing fields."But theres hardly consensus around oil prices, and indeed theyve slipped about 7 percent in the pastmonth. The Citigroup report predicts U.S. energy production will help push down crude prices — fromthe recent range of $90 to $120 per barrel to $70 to $90 per barrel by the end of the decade.Another analyst, John Kilduff of Again Capital, see the various forces tugging both ways on oil — U.S.production gains, refinery closures, a Saudi production dial-back — bringing a kind of equilibrium. Hesee prices this year staying between $80 and $110.Natural Gas LandscapeThere is an estimated 2,200 trillion cubic feet of recoverable natural gas in the U.S., which the EnergyInformation Administration says could be a centurys worth.The results of an in-depth University of Texas at Austin study announced Thursday project that theBarnett shale — which underlies some 17 Texas counties and is the second largest in the U.S. — couldkeep producing low-cost gas through 2030.The natural gas opportunities loom large, but so do environmental concerns.The drilling, which depends on the use of hydraulic fracturing, or fracking, has met fierce opposition inother areas with large shale formations, such as the Marcellus, which stretches from New York to
    • Virginia, due to concerns about pollution of water supplies and other environmental impacts. (Seeslideshow: Fracking: How It Works, Where Its Done)In the near term, a mild winter that has kept heating demand low has backed up inventory, a MorganStanley report released Monday said.This week several major natural gas interests, ONEOK, DCP Midstream Partners,Copano Energy andWestern Gas Partners among them, reported earnings. Shareholders showed some disappointment ineach in the days following. ONEOK, for one, beat estimates, but showed earnings decline from last year,and worse, reduced guidance — roughly 20 percent for the full year.On the other hand, a longer-term indicator, the NYSE Arca Natural Gas Index, is up 22 percent since June2012 lows.Already, supply growth has been more than the market can handle, Pope said, at a time when not a lotof new wells are being drilled. And Morgan Stanley expects Marcellus production to grow in 2013 "asthe regions infrastructure de-bottlenecks.""Weve seen fits and starts on the demand side, from chemical companies and refiners, for example,"Pope said. "But its nothing that can handle the scale of whats happening on the supply side, whereweve had some 35 percent increase from onshore alone in the past five years."The only thing that would really turn things around for natural gas in the near term would be somethinglike adoption for transportation, he said, but added that theres no domestic energy policy to incentivizesuch a thing.However, some are making a push. Billionaire energy magnate Boone Pickens joined New York MayorMichael Bloomberg last week to unveil the citys first natural gas-powered food truck.Pickens told CNBCs "Squawk Box" there is potential to transform the global energy picture. "You canknock out OPEC by just taking the diesel trucks, 18-wheelers, to natural gas," he said. "You can takeOPEC out. Its that easy."In the meantime, for lack of better alternatives, natural gas companies go to the "expedient solution,"Pope said, of exporting liquid natural gas overseas, where they can command five to 10 times betterprices.The Morgan Stanley report also saw exports to Mexico as offering relief to bloated natural gasinventory, as do defections of users of coal, which is undercut both by low natural gas prices and morestringent rules from the Environmental Protection Agency.Kilduff notes that theres less gas in storage this year than last, and says that as natural gas displacesmore coal for electricity, the unit price will stabilize at $5 to $7 per unit, from a bottom below $2 lastyear. Its currently around $3.50.
    • The key to finding an edge among natural gas companies, Kilduff suggests, is size and technology, citingExxon Mobil as an example of a company with a large gas portfolio.Also, despite the controversy, he said shale plays are where its at. "The technology is improvingmarkedly even now," he added.Article Syndication done by AmeraTex Energy (http://pressdoc.com/p/000vey) - An Oil & Natural GasExploration Company.AmeraTex Energy18601 Lyndon B Johnson Fwy #401Mesquite, TX 75150