67 WALL STREET, New York - September 28, 2012 - The Wall Street Transcript has just published its Investing in Energy and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Investing in Energy - North American Shale Development - Investing in Technology - Oil and Gas - E&P - Value Investing
Companies include: Enterprise Products Partners L (EPD) and many others.
In the following excerpt from the Investing in Energy Report, an experienced oil and gas portfolio manager discusses her outlook for the sector for investors:
TWST: As of July 31, your top holding in the Canadian fund was Crescent Point Energy Corp.
Ms. Stevenson: That's right, and that's also the top holding in my U.S. fund.
TWST: What is that makes that so interesting to you?
Ms. Stevenson: Because they produce oil and they made a tremendous amount of money on that oil. We look at the profitability of what a company does. It is called their netback, and that's how much money they make on their units of production, their gas or their oil. Crescent Point (CPG.TO) has really high netback. They are a very profitable operator, which in a company that pays a dividend is really crucial. They have enough cash flow to develop their projects as well as enough money to pay me my dividend. Plus, they have a massive inventory of oil project - they have five separate projects that each has resources of 1 billion barrels.
TWST: Please tell us about some other interesting stories in the fund.
Ms. Stevenson: Some other interesting stories would be Vermilion (VET.TO). It is my second-largest holding in my U.S. fund, and they have oil in a play called the Cardium in Alberta. They have oil off the coast of Australia; they have oil in France; and they have gas in Europe. In Europe, you make about $9 on gas; in the U.S., you make about $3. So it all depends on where your gas is as to how profitable it is. They have international oil plays in addition to their Canadian projects. The price of oil they receive on international projects is around $114, and West Texas, WTI, is $95. So their oil that's not in Canada gets another $15 to $18 a barrel, which is very attractive.
Some other interesting ones, to switch gears a little bit to the processing side of the business, we own a company called Pembina Pipeline (PBA). That's my fourth-biggest holding today. They recently bought another company that we owned called Provident Energy. They have oil pipelines, oil-processing units, gas-processing plants, natural-gas-liquids fractionation towers and a marketing division. So oil and gas companies don't always do these activities themselves. They just give their production to a company like this who charges them a fee to process, market and sell it for them. It's a very much a fixed-fee type of business with much less volatility than E&P companies that are tied much more directly to commodity prices.
TWST: You mentioned you include MLPs in the U.S. portfolio. What about some of those?
Ms. Stevenson: Right now, in my U.S. fund the largest MLP holding is Enterprise Products Partners (EPD), which is a huge pipeline MLP in the U.S. They own massive core infrastructure in a number of regions in the U.S., with great exposure to several key growth areas.
TWST: What are some of the risks of investing in energy?
For more from this interview and many more visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.