"The “oil glut” (ie. OECD surplus oil inventories to the rolling 5 year average) has fallen from a 334MM Bbls surplus as of January 2017 to a 26MM Bbl deficit and this number could swell to a deficit of more than 300MM Bbls by the end of 2018." - Eric Nuttall, Senior Portfolio Manager Sprott Energy Fund / Sprott Energy Opportunities Trust
This article is six month old, but right on target: http://www.ninepoint.com/commentary/com ... gy-022018/
Energy Stock Prices are out-of-whack with profits
Energy Stock Prices are out-of-whack with profits
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Energy Stock Prices are out-of-whack with profits
Eric' Summary is worth reading twice:
"Oil is trading near a 4 year high and is in a multi-year long bull market which cannot be interrupted barring a global depression and the 65% dislocation in performance between the price of oil and oil stocks over the past year is the largest that anyone has ever seen in their careers. Still, the logical question to ask is what has to happen for this dislocation to end? We believe it will be a combination of several things:
1) US E&P’s continuing to embrace their new focus on returns vs. growth which results in less capital being directed into the ground (ie. lower than historical growth rates despite high oil prices) and a better experience for shareholders as they are finally rewarded with dividends and buybacks.
2) Service stocks proving their very positive forward looking guidance in printed actual results (ie. Q1 reporting)
3) further implementation of share buybacks by both E&P’s (over $4BN announced in February) and service companies (FRAC announced a $100MM buyback; stock was up 8% on the news).
[As a side note we continue to urge all Canadian oil companies trading near their PDP RLI’s versus EV/CF using strip pricing to stop drilling and just buyback their own stock…same result = per share growth while supporting one’s share price]. While the exact timing of the inevitable inflection in sentiment is impossible to predict, compensating investors for this uncertainty is highly meaningful upside: we hold several stocks in which we see more than 100% upside."
~ 50% of their upstream holding are in our Sweet 16
"Oil is trading near a 4 year high and is in a multi-year long bull market which cannot be interrupted barring a global depression and the 65% dislocation in performance between the price of oil and oil stocks over the past year is the largest that anyone has ever seen in their careers. Still, the logical question to ask is what has to happen for this dislocation to end? We believe it will be a combination of several things:
1) US E&P’s continuing to embrace their new focus on returns vs. growth which results in less capital being directed into the ground (ie. lower than historical growth rates despite high oil prices) and a better experience for shareholders as they are finally rewarded with dividends and buybacks.
2) Service stocks proving their very positive forward looking guidance in printed actual results (ie. Q1 reporting)
3) further implementation of share buybacks by both E&P’s (over $4BN announced in February) and service companies (FRAC announced a $100MM buyback; stock was up 8% on the news).
[As a side note we continue to urge all Canadian oil companies trading near their PDP RLI’s versus EV/CF using strip pricing to stop drilling and just buyback their own stock…same result = per share growth while supporting one’s share price]. While the exact timing of the inevitable inflection in sentiment is impossible to predict, compensating investors for this uncertainty is highly meaningful upside: we hold several stocks in which we see more than 100% upside."
~ 50% of their upstream holding are in our Sweet 16
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group