LNG Markets Growth Key Driver for Global Natural Gas Price Forecast: a Wall Street Transcript Interview with Iain Reid, Senior Equity Research Analyst with Jefferies & Company, Inc. (JEF)

Wall Street Transcript

67 WALL STREET, New York - January 14, 2013 - 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: Capital Expenditures and Consolidation Activity - Refining Crude Price Differentials - Frontier Exploration and Development - Shale Drilling Capital Expenditures - Oil and Gas Price Divergence - Oil Price Expectations - LNG Global Pricing Differentials

Companies include: Exxon Mobil Corp. (XOM), Eni SpA (E), Petroleo Brasileiro (PBR), Anadarko Petroleum Corp. (APC), Total SA (TOT), Chevron Corp. (CVX), PetroChina Co. Ltd. (PTR), ConocoPhillips (COP), Mariner Energy, Inc. (ME), Cheniere Energy, Inc. (LNG) and many others.

In the following excerpt from the Oil & Gas: Refining, Independent and Major Integrated Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Can you begin with a brief overview of your coverage of the natural gas sector, including some of the specific names you follow?

Mr. Reid: What we do at Jefferies each year is a global natural gas piece, which looks at the key drivers of the natural gas business globally. The three main markets that can be identified in the world in terms of natural gas or the important ones at least, are the U.S., which is still the biggest single country gas market; Europe, which is one of the biggest regional markets still globally. There we look at really the EU, and finally Asia.

In terms of demand, we consider all the supply sources for Europe, obviously a very large one is Russia, plus LNG from outside of Europe but also the indigenous production there. And then we also look at Asia. And Asia is a key focus for long-term demand growth. Japan, China, India and Korea are the major demand centers. And then on supply basis, for those areas, we focus particularly on LNG. We're pretty focused on that because that's a very important part of what the major companies are doing.

In terms of stock coverage, I personally cover the global major oil companies. So this is the top seven by market cap globally, so that ranges from Exxon Mobil (XOM) down to Eni (E). All of them are involved to a greater or lesser extent in global gas and LNG. I also cover Petrobras (PBR) in Brazil, but I wouldn't say Petrobras is a major factor in terms of the global gas market, although Brazil as a whole is very important from energy point of view. So that's the context of what we've done.

In our report, we look at both the demand side of the equation, trying to identify where we see big upticks in terms of demand growth out to 2020, and we look at supply in terms of what the key elements in terms of new areas of supply both regionally, and we also try to identify the changes in the supply sources from a technical point of view. And obviously shale gas supply has been a very important part of what's changed here over the last five years.

There's a lot of growth in the LNG market. It has almost twice our global gas demand growth rate at 5% CAGR versus 2.7% forecast. A key question is where these additional volumes are going. Predominantly, they're going to Asia at the moment in terms of growth in the market. So that's the kind of the overall context of what we've looked at and the stocks that I cover. We also obviously include, when we're thinking about global gas markets, other stocks apart from the majors such as the U.S. E&P names and also the smaller European names. And here, we focus on companies such as Anadarko (APC), which is going to be the important part of the Mozambique gas developments going forward in East Africa.

Also we focus on BG (BG.L) to some extent, which is, for its size, the biggest LNG player per unit of market cap out there. And then we look at some of smaller stocks, smaller U.K.-listed E&P stocks such as Ophir (OPHR.L), which we've mentioned as one of our picks in terms of how to play what we see as a positive global gas market in the years to 2020.

TWST: 2012 has been a challenging year for natural gas and some headwinds remain. Nevertheless, you are fundamentally positive on the sector. Tell us what you like about natural gas and specifically which kinds of companies you favor.

For more of this interview and many others 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.

View Comments (0)