Stocks that Benefit from the Resource Recapture Phase in North American Drilling: an Exclusive Interview with Eli Kantor, Senior E&P Equity Research Analyst with IBERIA Capital Partners

Wall Street Transcript

67 WALL STREET, New York - February 1, 2013 - The Wall Street Transcript has just published its Oil & Gas: Exploration & Production 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 Price Expectations - Oil and Gas Transportation Infrastructure Demand - Shale Drilling Dynamics - Shale, Offshore and Deepwater Drilling

Companies include: Continental Resources Inc. (CLR), Kodiak Oil & Gas Corp. (KOG), Whiting Petroleum Corp. (WLL), Pioneer Natural Resources Co. (PXD), Concho Resources, Inc. (CXO), Approach Resources, Inc. (AREX), Cimarex Energy Co. (XEC), ConocoPhillips (COP), W&T Offshore Inc. (WTI), St. Mary Land & Exploration Co (SM), Magellan Midstream Partners LP (MMP), Sunoco Logistics Partners LP (SXL) and many others.

In the following excerpt from the Oil & Gas: Exploration & Production Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Tell us about your coverage universe.

Mr. Kantor: I currently cover nine publicly traded E&P companies, with a focus on independent E&Ps with meaningful exposure to the Williston and Permian basins. My plan is to ramp up to between 15 and 20 names over the next few months.

TWST: Why those two basins?

Mr. Kantor: I chose the Williston and Permian because there is going to be a tremendous amount of capital investment in each area over the next few years. They represent two of the three largest onshore oil shale discoveries in the U.S. From a sell-side research perspective, we can provide a lot of value to investors in analyzing how production, drilling activity, infrastructure and commodity price trends impact equity valuations.

TWST: Themewise, where are you focusing your attention in the space right now?

Mr. Kantor: Our focus, and what I think differentiates us from other sell-side research platforms, is an intense bottom-up analysis: researching well results, completion information, decline rate trends, commodity mix trends and transaction details across the industry. The data-point-centric research model provides the backbone in generating real time nonconsensus and differentiated investment recommendations that help our institutional client base generate alpha.

As far as trends go in 2013 and beyond, the E&P industry is at the beginning of a new and unfortunately less-exciting stage in its life cycle. The previous stage lasted from 2005 through 2012, and was characterized by a renaissance in resource capture. The advent of horizontal drilling activity and the improvement in completion design resulted in the discovery of dozens of highly prolific unconventional resource plays. It started with the Barnett shale in Texas and may potentially conclude with the Utica shale in eastern Ohio and western Pennsylvania. This next in the E&P industry's life cycle is going to be focused on the development of these new plays, commodity price volatility and the ability for midstream companies to facilitate producer's needs in getting newly discovered resources to market in an efficient and low-cost manner.

TWST: What kind of companies, broadly speaking, do you see doing well in that new environment?

Mr. Kantor: Stocks that should perform best are those that won the resource capture phase. Those are companies that have meaningful exposure to oil-centric basins like the Williston, Permian, Eagle Ford and potentially the Utica, depending upon how the exploration of that play pans out.

Given the vast disparity between oil prices and gas prices, you're going to want to own the companies that have significant unbooked resource potential in the oil-centric basins. In my coverage universe, the Williston basin exposed names...

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.

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