67 WALL STREET, New York - January 17, 2012 - The Wall Street Transcript has just published its Oil & Gas: Refining, Independent and Major Integrated Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Narrower Trading Range for Oil and Gas - Capital Expenditures and Consolidation Activity - Refining Crude Price Differentials - Frontier Exploration and Development
Companies include: Enterprise Products Partners (EPD); Aker (ASKO.OL); Anadarko (APC); Apache (APA); and many more.
In the following brief excerpt from the Oil And Gas Special Report, expert anlaysts discuss the outlook for the sector and for investors.
Pavel Molchanov joined Raymond James & Associates, Inc., in June 2003 and began work as part of the exploration and production research team, becoming an Analyst in January 2006. He initiated coverage on the alternative energy sector in fall 2006 and the integrated oil and gas sector in mid-2009. Mr. Molchanov has been recognized in the StarMine top analysts survey, the Forbes Blue Chip Analyst survey, and The Wall Street Journal Best on the Street survey. He graduated cum laude from Duke University in 2003 with a B.S. in economics.
TWST: In your last interview with us, you talked about frontier exploration. Would you give us an update on which of the companies are leading the pack on frontier exploration and what are the most promising new frontiers at this point?
Mr. Molchanov: A great example of a frontier country that has graduated from the frontier category into a more established oil producer category is Ghana in West Africa. Until the end of 2010, Ghana had virtually zero production of oil, and although it's still not a huge oil producer, it has grown substantially as the Jubilee Field offshore has ramped up its production. Companies involved in Jubilee include Anadarko Petroleum (APC), one of the large independent producers, and Kosmos (KOS), which is a smaller independent company that a few years ago was the subject of a takeover battle involving ExxonMobil. So that's one example of a country that had been in the frontier category and is now in the development stage of its life cycle.
TWST: What are either the outstanding regulatory issues or governmental policies that, if they were to be resolved, would have the most significant impact on the sector?
Mr. Molchanov: Well, right now as we think about the United States, the major regulatory concern for oil and gas is permitting in the Gulf of Mexico. The moratorium on Gulf of Mexico deepwater exploration ended earlier this year, but even though it is officially over, permitting has been quite difficult. And that reflects the caution by federal regulators in the wake of the Macondo oil spill. As we get further away from the disaster in the Gulf, I suspect that permitting will become easier, and that will allow drilling to accelerate. But to be clear, we are not quite there yet. So in Iran, for example, the nuclear situation certainly is a concern for the region and for the global oil market. But it does not directly affect U.S. oil and gas companies because they are banned from drilling in Iran and have been for many decades. But there are also countries where the political situation has a direct effect on U.S. companies there. I mentioned Egypt earlier, where Apache (APA) is one of the leading foreign operators. In Libya, the civil war just ended a few weeks ago, and the situation remains a bit shaky. Companies in Libya include Occidental Petroleum (OXY), ConocoPhillips, Marathon Oil (MRO)and Hess.
TWST: Are there any important themes, trends or headwinds in this space we haven't discussed yet that you are monitoring and investors should be aware of?
Mr. Molchanov: An important theme is the growth of the LNG market in the Asia Pacific. It is particularly important in the wake of the Fukushima nuclear disaster in Japan that took place earlier this year. Let's think about what happened. The Fukushima nuclear power station was flooded, there was a nuclear meltdown, and immediately Japan lost a major nuclear power plant. And the country has also shifted its policy regarding nuclear power to be more cautious, and we've seen that play out not just in Japan but also in Europe - Germany, for example - and elsewhere in Asia.
Fukushima was just a shock to many policy makers, and as a result, nuclear lost favor to a large extent. And LNG, which for the Asian market represents the principal supply of natural gas, is going to be very important. Even without Fukushima, it would have been important because of the development of the natural gas market in China and India, not to mention Japan and Korea. But after Fukushima, it's going to be even more important. There are many companies that have leverage to the rapid growth of the LNG market in Asia. One in particular that I would highlight is Chevron, which is building currently the largest LNG project ever in Australia called Gorgon and another LNG project also in Australia called Wheatstone. There are other companies with leverage to the Asian LNG market. InterOil (IOC), in Papua New Guinea, is an interesting small-cap play on Asian LNG. Among large caps, I would also mention Exxon, Shell (RDS-A) and Apache. But Chevron really stands out. I think LNG is going to be a key theme for investors to keep track of. To put it in perspective, right now, the price of natural gas in the United States is below $4 an McF.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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