Oil Takeover Targets – Who’s Next?

 Has a rush to buy up oil & gas companies just started? Royal Dutch Shell is set to become by far the largest FTSE 100 member by market capitalisation at 7.6% of the index (Figure 1), worth nearly £160 billion and 35% larger than the second-largest company HSBC, once it completes the £47 billion purchase of BG later this year. 

1. Royal Dutch Shell Worth 7.6% of FTSE 100 Post BG Deal

Source: Author, stockopedia.com

In the late 1990s, the oil price plunged to $10 per barrel and set off a wave of oil industry mega-mergers: Exxon with Mobil, Chevron with Texaco, BP with Amoco. Fast forward to April 2015, and once again the oil price has plunged, more than halving from $110 per barrel in July last year to just $50 by January this year.

Now we have a new oil & gas mega-merger, Royal Dutch Shell taking over BG (the gas-dominated exploration and production arm of the former British Gas). This is in fact the second big oil company merger announced in the past few months, following US oil services company Halliburton which announced a merger with rival Baker Hughes in November last year. 

Why is Shell Buying BG?

With this purchase of BG, which has been beset by fundamental problems for some time, Shell is buying access to oil and gas reserves in Brazil and Liquefied Natural Gas (LNG) capability. These assets allow Shell to grow their oil & gas reserve base (replacing oil and gas currently being produced) and to be a dominant player in the growing LNG market, alongside the state of Qatar. 

The basic idea is this: that the oil & gas-producing assets of BG are cheaper for Shell to buy in principle than developing new oil & gas fields and putting them into production – the so-called “replacement” cost. Why take the risk of developing new oil fields (which may not even produce as expected), when you can buy proven, producing oil & gas reserves off the shelf?

Who Else Could Be Looking To Buy Oil & Gas Assets?

While Shell has already chosen its prey, which other mega-oil companies could also be looking to buy up cheap oil & gas reserves? As the oil & gas market is global by nature, we have to look abroad for potential acquirers. 

In the US, ExxonMobil and ChevronTexaco are the two largest integrated oil companies with the financial muscle to do big deals. In Europe, Total of France and Statoil of Norway stand out as huge integrated oil companies that might find it easier and cheaper to buy up oil & gas reserves via acquisition of companies rather than by developing new oil & gas fields from scratch. 

Who could be next to succumb to oil merger mania? BP?

In the UK, there are both big and smaller potential acquisition targets in the Oil & Gas sector. In a previous IBT article I have highlighted the attractions of the ailing BP (hurt by the 2010 Gulf of Mexico Macondo disaster). 

BP could be an interesting target for the two US mega-oil companies Exxon and Chevron, given its huge asset base in the US/Alaska. I should note that BP has gained over 10% since I discussed it back in December last year, and BP’s market size is only 35% that of Exxon and 63% that of Chevron (Figure 2)…

2. BP Could Be a Target For US Giants Exxon, Chevron

Source: Bloomberg.com

Other Potential UK-Based Targets: Tullow, Premier Oil, EnQuest, Ithaca Energy

Otherwise, the oil exploration & production companies Tullow Oil (total company value: £5.2 billion; code TLW) and Premier Oil (total company value: £2.2 billion; code PMO) have both been cited as potential acquisition targets, and look cheap when comparing their total company value (the value of all shares + value of debt) to the number of barrels of oil they hold as Proven + Probable (2P) reserves in their developed oil fields (Figure 3). 

For instance, Premier Oil is currently valued at just $13 per barrel of 2P oil reserves following a drop of more than 50% in its share price from September 2014 to now (from 348p to 159p). Could an integrated oil giant swoop to acquire these now-cheap oil reserves?

 

3. Four Small/Mid-Cap Oil Targets? Valued at $10-22 Per Barrel of Oil Reserves

Source: Author, Company reports

Both Tullow Oil and Premier Oil have global oil & gas interests, spanning from West and North Africa to Pakistan and the Falkland Islands.

Closer to home, other acquisition targets could include the smaller, North Sea-focused oil exploration and production companies EnQuest (code ENQ, current share price 42p) and Ithaca Energy (code IAE; current share price 46.5p). Both of these companies also look like potentially cheap acquisitions for larger oil company predators, at values of only $6 and $14 respectively per barrel of oil held in their various North Sea oil fields, and benefit from the reduction in North Sea oil taxes in the latest UK Budget. 

There you have it: five UK-listed oil companies of varying sizes that could become tasty acquisition targets for global oil companies!

Edmund

Bloomberg TV Video: BG Group Shareholders Have Been Rescued by Shell

BCS Financial Group Global Equity Portfolio Manager Edmund Shing discusses both the outlook for European markets and Royal Dutch Shell’s acquisition of BG Group. He speaks with Guy Johnson on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

Video Link below:

Bloomberg TV: BG Shareholders Rescued by RD Shell

On Bloomberg TV - Interviews on Europe/Greece, Crude Oil Outlook

I would like to highlight a couple of videos from my interview this morning on Bloomberg TV, looking at a number of Strategy issues including Oil and Europe.

Please click on the web links below to watch the videos:

On Europe

Bloomberg TV Video: On Europe, Greece

On Oil

Bloomberg TV Video: On Oil (Edmund Shing)

Video: CNBC Worldwide Exchange Interview On Oil, Greece (amongst other things)

To watch my TV interviews on CNBC's Worldwide Exchange programme from Thursday 19 February, on the subject of Oil and Greece, please click on the links below:

CNBC WWE: Oil Has Hits Its Bottom

CNBC WWE: Capital Controls are a Last Resort

IBTimes: Airlines easyJet, Ryanair and Dart see soaring share prices

IB Times Article + Video Link:
airlines-easyjet-ryanair-dart-see-soaring-share-prices

It is the best of times for UK budget airlines easyJet (code EZJ), Ryanair (RYA) and Jet2 (owned by Dart Group, DTG)! Medium-haul airline passenger traffic to European destinations just keeps on growing as UK households seek to escape to sunnier climes from the generally gloomy weather at home. European air passenger traffic grew nearly 6% over the last quarter of 2014 (Figure 1).

Source: Market Realist, IATA

With a favourable following wind from the strong UK economy flowing through into:

• higher employment (unemployment rate of 5.8%, lowest since mid-2008),
• stronger wage growth and
• record high consumer confidence (highest reading in over 10 years),

this bullish traffic trend should be sustained over this year and into 2016 (Figure 2).

Source: Bloomberg

Both easyJet and Ryanair have ridden this UK consumer boom with a combination of rising passenger traffic (easyJet +6.3% year-on-year; Ryanair +7.6%; Figure 3) and improving load factors (the amount of seats per flight that are occupied; over 90% for easyJet and 87% for Ryanair). A rising load factor means better efficiency, and higher profits.

Source: Stockopedia

Reinforcing this trend, IAG (parent company for British Airways and Iberia) reported stellar passenger growth in January of 12.1% for its European routes compared with January 2014, far outstripping passenger traffic growth for other regions.

Profits Boosted by Lower Fuel Costs

Of course, fuel costs are a huge part of any airline's overall running costs, so the 50% drop in crude oil prices will have a positive leveraged impact on the bottom line for these three companies (Figure 4) – albeit with a lag, given that they all hedge future fuel costs to some degree to reduce the volatility and to improve the predictability of their cost bases.

Source: Platts, RBS, Digital Look

The near-halving in jet fuel costs since mid-2014 will continue to gradually flow through to the profit lines of airline accounts for the rest of this year and well into 2016, providing a following wind for UK airline earnings.

Profitability, Dividends and Cash All on the Rise

The results of these favourable revenue and cost trends on these UK budget carriers can be seen in improvements in profitability, cash flows and dividends, with returns on equity rising steadily for easyJet, Ryanair and Dart Group since 2011 (Figure 5).

Source: Stockopedia

And Yes, Price Momentum Has Already Been Positive

A glance at the share price charts of these three airlines tells you that the stock market is already looking kindly on this sector, with all three shares enjoying strong rising trends over the past 12 months (Figure 6).

Source: Bloomberg

Comparing easyJet, Ryanair, Dart Group? Which One is Best?

At this point, we can see that UK low-cost airlines are riding on the crest of several positive profit waves; but which one should be choose to invest in?

Source: Stockopedia

From Figure 7, I would choose Dart Group (DTG) if I had to choose only one airline horse to back – it is the cheapest by far on both price/earnings (adjusted for net cash) and EV/EBITDA valuation ratios, has the best cash backing on its balance sheet (around £180m of net cash once you subtract cash held on advance customer bookings) and has relatively lower leverage from the leasing of airplanes, with only 9 out of its 53-strong fleet being leased (the other 44 being owned outright by the airline).

With Dart Group, I would argue that you are getting exposure to a real deep value situation which is already seeing positive price momentum, and with room for growth as ticket sales continue to fly.

But if you prefer a larger company with a decent dividend yield, then by all means opt for Easyjet (EZJ) with its 3.4% yield, which I chose as one of my Santa's Secret 6 Stock Tips back on December 18.

Reuters Article (Quoted): Some fund managers take a punt on small oil firms

•     Some fund managers take a punt on small oil firms 
•     Expect bigger share price rebound with an oil recovery 
•     Focus on companies like Caza Oil, Bowleven, Soco 

  
    By Atul Prakash 

    LONDON, Feb 13 (Reuters) - After a rout in energy stocks on the back of a slump in crude oil prices, some fund managers have started fishing for smaller oil exploration companies, betting that a price recovery will lead them to outperform. 

    Smaller players, especially oil explorers, look much more attractive on valuation grounds than companies like BP  BP.L  and Royal Dutch Shell  RDSa.L  as their shares have fallen much more than oil majors during the sell-off, they said. 

    These stocks are not without risk -- unlike their more diversified and financially more robust bigger rivals, small  firms are usually less able to offset a slump in oil prices. But investors say the potential rewards look attractive. 

    "I feel relatively confident that we have seen the bottom of the oil price. In such a scenario, high-beta (more volatile) plays like smaller oil explorers and service companies are the first to benefit," said Edmund Shing, global equity fund manager at BCS Asset Management. 

     "At these levels, they also become attractive M&A (takeover) targets as it may be cheaper for big companies to buy exploration firms than find new reserves. If oil prices gain, big players will become more confident, accumulate cash, cut capex and look for cheaper reserves." 

    Oil  LCOc1  rose above $60 a barrel on Friday for the first time this year, with prices up more than 30 percent from a multi-year low in mid-January.    

    Shing said that in order to cut some risks, he was investing in firms having low debt and those which had hedged their future output. BCS recently bought Caza Oil & Gas  CAZA.L , Bowleven  BLVN.L , Soco International  SIA.L , Eagle Rock Energy Partners  EROC.O , Memorial Production Partners  MEMP.O  and Emerge Energy Services  EMES.K . 

    Shares in the firms, except Memorial, are up 6 to 34 percent in the first two weeks of this month on a recovery in oil, which has gained 12 percent in February. In contrast oil majors like BP, BG Group and Shell are up 7 percent this month.   

      

INDISCRIMINATE 

    Thomson Reuters data shows smaller oil firms are cheaper. Memorial trades at 14 times its 12 month forward earnings, while firms like Bowleven have a negative price-to-earnings ratio, against 30 times for BG Group and 20 times for BP. The 12-month price-to-book ratio for smaller oil firms hovers between 0.2 to 0.6, against 1.1-1.6 for large players.   

    "Smaller oil companies were hit by a slump in crude oil prices in an indiscriminate manner, so for some that was an over-reaction. It does make sense at this juncture to start 

looking at them," said Chris Rowland, buy-side energy analyst at investment management company Ecofin. 

    "We like those smaller oil-related names that are operating in cheaper oil basins and are well-hedged, and without pressing near-term debt repayments or covenant tests, which is leading us to look to buy selected U.S. names at this stage." 

    Investment banks are also positive on some smaller oil firms, with Morgan Stanley recently raising its stance on Soco to "equal weight" from "underweight" and Exane BNP Paribas hiking its target price for the company. UBS, which has a "buy" rating for Memorial Production, has increased its target price for the stock to $18 from $15 the stock.  ID:nWNAB05XO6   

    That is not to say that Big Oil is no longer attractive -- after all, majors have fought to protect their dividends by cutting spending -- but investors are looking at different ways to play a potential recovery. 

    "We are still positive on the oil sector, but have become very selective," James Butterfill, global equity strategist at Coutts.   

3 Feb 2015 Bloomberg TV Video Interview - my comments on BP, Oil

Please click on the web link below to watch a short video of my interview on Bloomberg TV this morning, discussing BP’s results and prospects for the oil price and oil companies.

Bloomberg TV Video: bcs-s-shing-says-shell-exxon-could-easily-buy-bp

2 Bloomberg TV Interviews on European Central Bank, Oil Price

Bloomberg TV Interview 1: Market Is Expecting a Lot From Mario Draghi: Shing

Bloomberg TV Video Link 1

Bloomberg TV Interview 2: Falling Oil Is an Underplayed Risk: Shing

Bloomberg TV Video Link 2

Royal Dutch Shell and BP tie-up would ease the pain for oil and gas investors

IBTimes UK Article Link

IBTimes Video Link

Since July, the collapse in world oil prices has been the talk of global financial markets. Brent crude oil, the global benchmark, has fallen from $115 per barrel to under $69 today, a price not seen since 2009 (Figure 1).

1: Brent Crude Oil Back to Prices Not Seen In the Last 5 Years 

Source: Investing.com

This has been painful for investors holding oil and gas stocks such as Royal Dutch Shell (RDS) or BP, with Royal Dutch Shell shareholders nursing losses of 10% since June, and BP shareholders an even more painful 15% loss since June.

Merger and acquisition activity hots up in oil

There have been a number of consequences of this sharp oil price fall, one of which has been an increase in merger and acquisition activity in the global oil and gas sector.

For instance in oil services, Halliburton is in the process of taking over US rival Baker Hughes for $35bn. But perhaps the biggest potential takeover in this sector is still ahead of us...

Could Royal Dutch Shell buy BP?

This sounds ridiculous at first flush – after all, BP is a giant company worth over £136bn at its current 425p share price (as of 5 December). However, it is perhaps not such an outlandish notion upon reflection.

2: BP and Shell Share Prices Have Gone in Different Directions Since 2010 

Source: Yahoo Finance

First of all, at today's 425p BP (code: BP.L) languishes some 34% below its 640p share price reached in March 2010, before the Deepwater Horizon disaster in the Gulf of Mexico took place, costing BP $27bn dollars (so far) in clean-up costs and damages.

In sharp contrast, RDS's A shares (code: RDSA.L) have gained 13% from 1910p in March 2010 to 2149p now (Figure 2). 

As a direct result of this widening gap in relative share price performance, BP is now only worth 64% of the total market value of Royal Dutch Shell, down from almost level pegging back at the end of 2009 (Figure 3). 

3. BP's Market Capitalisation Now only 64% of Royal Dutch Shell's 

Source: Yahoo Finance

Are BP's shareholders fed up with Waiting for Godot?

We could well argue that BP's longstanding shareholders are becoming fed up of waiting for the company to regain the 640p level seen pre-disaster back in April 2010.

BP's sale of its share in the Russian TNK-BP joint venture in return for 20% of Russian oil company Rosneft is not proving a great success.

This stake is worth 38% less today than it was back in early July, thanks to a nasty combination of a falling Rosneft share price together with a collapse in the value of the Russian ruble on the back of international sanctions.

There has been increasing press speculation of late regarding a possible Royal Dutch Shell-BP tie-up, with a mooted £5 per share bid for BP equating to 16% more than Friday's closing share price, financed presumably by the issue of new Royal Dutch Shell shares.

The new Anglo-Dutch oil and gas combo would rank second by size in world oil and gas giants, only a fraction behind the US behemoth ExxonMobil (Figure 4).

4. The Largest Global Oil & Gas Companies

Source: Yahoo Finance. Note: RDS BP combination assumes £5 bid price for BP shares

Given that these large oil companies will find life less profitable in the future at these new, lower crude oil price levels, a cost-cutting (and profit-boosting) merger of these UK oil giants makes sense at present, as it would give the combined entity even greater global scale to compete for new projects. 

Worth mentioning too is that BP offers a juicy prospective dividend of over 6% - so you are paid to wait patiently! Even if a bid from RDS does not materialise, you should still benefit from an eventual rebound in oil prices as global demand grows, as crude oil prices have typically rebounded in the past after such sharp price declines!

Edmund

Long-term investors: Time to Fill up the Tank with Energy Exposure

To read the article on Stockopedia, click on the link below: 

Stockopedia article link

Yes I know, the Oil & Gas sector has been a horrible place to be, really since mid-year. Trust me, my portfolios have suffered thanks to a sizable exposure to this sector.

But I believe that there are good reasons for expecting the oil price to rise, lifting the oil & gas sector with it:

1. There is an OPEC meeting on November 26, and with Saudi Arabia as the official swing producer not wanting to be the only country to cut production, is turning up the heat on other OPEC nations to participate in coordinated cuts. Bear in mind that OPEC are producing a lot more crude today than in previous months/years thanks to recovery in Iraq crude production to near to 3m barrels/day, and more recently Libya which has raised production from very little to 750,000 barrels/day over the last 2 months. But no other OPEC producers, who had increased production originally to cover the Iraq + Libya shortfalls, have cut back meaningfully - yet.
   
2. US oil refineries have been running at lower capacity rates as is normal for this time of year, of the order of 84% vs. 92% previously, as they go offline for scheduled maintenance. So as they come back online, US demand for crude should pick up again, helping to correct the unusual contango situation (where spot crude is cheaper than dated futures, whereas normally it is the other way around).
   
3. Global demand for energy will continue to grow, most notably from emerging markets as they start to catch up with Western-style energy-consuming habits, and if anything, lower crude prices will encourage greater consumption, with a lag...
   
4. There is still a risk of a cold winter hitting Northern Europe and the Northern part of the US - Siberia is seeing lots of snow, there is even snow already in Moscow! This often presages a hard winter in the North of the US, which would mean more oil and gas consumption for heating. 

Even with a small bounce today in Brent crude oil price to $86/barrel, it is still a very far cry from the $115/barrel touched back in mid-year. I would not expect necessarily to get back to these heady levels, but I would not be surprised at all the see Brent back above $90/barrel sooner rather than later. 

Wishful thinking, perhaps. But we shall see... In the meantime, I am increasing my holdings in a number of junior oil companies with exposure to US shale such as Caza Oil & Gas Inc (LON:CAZA), and also increasing my holdings in oil- and gas-focused ETFs in the US. 

Edmund

Oil Your Portfolio with Energy Exposure

Since the beginning of September, the benchmark FTSE 100 index has dropped over 5%. A buying opportunity, you might well think to yourself. But can we do better than that, by looking at some of the sectors within the UK stock market that have suffered more over the last month?

Bringing up the rear in performance over the last month with a 19% fall is the Food Retail sector – but this is for very good reasons, with the pressure on supermarkets from the German discount chains Aldi and Lidl, resulting in worsening profit performance from Tesco, Sainsbury and Morrisons. In my judgement, while there may be a value investing opportunity in these names, timing any investment is proving tricky, to say the least. 

I would rather focus on another large sector that has been some beaten up – the Oil & Gas sector, which has dropped over 7%. This has been principally driven by the precipitous drop in crude oil prices on both sides of the Atlantic, with Brent crude oil now costing a tad under $93 per barrel, $22 lower than the lofty height of $115 per barrel touched back in late June (Chart 1).

1: The Fall in Brent Crude and the Impact on the Oil & Gas Sector

Source: Author, Bloomberg

Why Could Oil & Gas Prices Rise?

With Winter approaching and the possibility of a cold, hard winter in the United States triggering greater demand for oil products such as heating oil, not forgetting the potential of disruption in supply of oil and gas from our Russian neighbours, we could at some point see a sizable rebound in global crude oil and natural gas prices. 

After all, OPEC nations are also keen to see crude oil prices stay above $90/barrel for their own, budgetary reasons, as oil and gas represent the vast majority of their government revenues. 

I suspect, furthermore, that global markets under-estimate the strength of the growth in long-term energy demand from the mega-sized emerging economies of China and India, which between them boast a population of over 2.3 billion who are currently using a mere fraction of the oil & gas per head that we consume per year in the Western world. 

Oil & Gas Exposure via Stocks, Sector ETFs

If you like this value investing theme, how best to get exposure? You could of course simply buy a few familiar large-cap oil stocks such as Royal Dutch Shell, BP or Total. 

Or you could buy an Oil & Gas Exchange-Traded Fund (ETF), such as the db x-trackers STOXX Europe 600 Oil & Gas ETF offered by Deutsche Bank’s x-tracker ETF division (code: XSER on the London Stock Exchange).  

Two Less Obvious Oil & Gas Investment Options

But I think that there are a couple of more intriguing investment alternatives that are a little less obvious, but which offer greater long-term potential. 

Firstly, there is the Ecofin Power & Water Opportunities Fund (code: ECWO on the LSE), an investment trust listed in London which is currently trading at a substantial 23% discount to its own Net Asset Value. To put this another way, you can buy exposure to £1 of stocks for only 77p! The Fund’s largest holdings are in oil companies, notably the US shale oil play Lonestar Resources and US oil infrastructure stock Williams Companies. In addition, the Fund also pays out a generous 4% dividend yield, a stream of dividends that has remained impressively consistent since 2005 when the Fund started. Since the beginning of this year, this trust has gained 32% to around 162p now, while the UK oil & gas sector has stagnated (Chart 2).

2: The EcoFin Power & Water Opportunities Fund Has Done Well

Source: Author, Bloomberg

A second way to take an interesting exposure to the oil & gas sector is through US-listed Master Limited Partnerships (MLPs), a particular tax-advantaged structure largely for infrastructure assets such as oil and gas pipelines which obliges the MLPs to pay out 90% of their profits in dividends. This high-yielding asset class has performed extremely well, with the London-listed Source Morningstar US Energy Infrastructure MLP ETF (code: MLPP on the LSE) up 16% in sterling terms to 7200p since April of this year. This ETF also also pays out a generous 6% dividend yield, to help investor returns (Chart 3).

 

3: Master Limited Partnerships Have Performed Very Well

Source: Author, Bloomberg

These are two intriguing alternatives to the more obvious oil & gas investment options which are well worth considering, particularly if you are an income-oriented investor. 

Edmund

VIDEO: Why September is a Danger Month for Equities; but better for Bonds, NatGas, Gold...

Click below for a 3-minute Video Presentation on the Seasonal Dangers for Stocks,
and Why September is Better for Bonds, Gold, Gas

Beware September; A Danger Month for Equities!

1. September Has Been The S&P’s Worst Month

2. Mid-September to Early October is Worst

3. Healthcare Does Best

4. Long Bonds Are Still A Good Place to Be

5. As Is Gold

6. Gold Stocks Get a Leveraged Boost

7. Natural Gas Tends To Be A Big Sept-Oct Winner: +22% in 2 Months on Average!

8. Total A Good Natural Gas Play

Summary

1. Equity Markets Often Suffer in September
2. Long Bonds Tend To See Lower Yields
3. Sectors: Technology is Worst-Hit, Healthcare Does Best
4. Two Commodities to Like In Sept-Oct: Gold, Natural Gas
5. Two Stocks to Like: Goldcorp, Total

Sources for charts and tables: www.equityclock.com, www.stocktradersalmanac.com

Global Strategy Weekly in Charts: Stocks to return to recent highs, then what?

Macro: Better US Outlook, But Europe Worrying

1. Markit Manufacturing PMI Points to Stronger US Recovery

2. US Initial Jobless Claims Back to Cycle Lows

3. Why the Fed Can Stay on Hold Longer: High 12.2% Under-Employment Rate

4. German 10-year Bond Yield < 1% Higlights Deflation Risk: ECB to Help?

Stock Markets: Tech, Financials Hit New High, Europe Rebounds

5. US Technology, Financials Sectors Break Out to New Highs

6. German Stocks Lagged Word By Over 8%; Now Catch-Up Time

Commodities: Has Crude Oil Found A Bottom At Last?

7. Brent Crude Oil Finally Bouncing Off $102/barrel

8. Oil Services, Exploration/Production Start To Recover

9. Nearly the Season for the Energy Sector To Perform!

Risks: Watch For Mid-Term VIX to Return to <13

10. Mid-Term VIX Volatility Index Under 13 Will Flag Renewed Risk to Stocks

11. Warning: US Retail Sentiment Back to Bullish High (Contrarian Signal)

Investment Summary

1. US Economic Recovery Seems to be Improving
2. But High Under-Employment Means the Fed Can Wait…
3. Risk-On Recovery Driving US Tech Financials To New Highs
4. European Stocks Still Primed To Recover, But Hinges on the ECB
5. Opportunity to Return to Oil Stocks As Brent Crude Bottoms
6. Watch for the Mid-Term VIX to Dip Under 13; then risk/return may change

Edmund

CNBC Closing Bell: Guest Host 23 July 23014 (Video)

I appeared on Louisa Bojesen's Closing Bell show on CNBC Europe yesterday as guest host. 

Here is a short video link of me discussing why I like exposure to US shale oil & gas:

CNBC Closing Bell: Shale Oil

Video: Why I like Energy and Technology in a bullish US stock market environment

Why I still like the Energy and Technology sectors while US stock market trends remain bullish: 

Video link here:

Key Investment Themes: Energy, Technology, Hunt for Yield

Edmund

Buying Into Black Gold, for the Long-Term

Oil As a Strategic Long Holding

Here are some reasons why I think that the Energy sector and Oil is still an excellent long-term investment theme for some time to come, with a couple of short-term drivers to drive oil-related commodity and share prices to boot...

1. Seasonal Effect - US Gasoline Prices Break Out For Summer (Driving Season)

Source: St. Louis Fed, Bloomberg

Energy: The Long-Term View

2. Long-Term Oil Driver: Consumption Growth from China, India etc.

3. So far, Non-OPEC (North America) Production Growth Has Kept Up

4. But Will Be Tough to Keep Up With Demand...

Energy: Short-Term Risks

5. Iraq, already OPEC's 2nd-Largest Producer, Is Forecast Huge Production Growth

6. With ISIS Advances, Iraqi Civilian Deaths Now Highest Since 2007

Investment Conclusions

7. Buy US Integrated Oil, Oil Services, MLP Stocks on Weakness

(JPMorgan MLP ETF: US code AMJ; 

iShares Oil Equipment & Services ETF: US code IEZ)

8. Buy US Oil, LNG Shipping On US Export Growth

(Guggenheim Shipping ETF: US code SEA; 

Teekay Corp. (US code: TK)

Summary

1. The Oil Sector Remains A Key Long-Term Investment Theme
2. World energy demand to grow fast
3. Short-Term: Geopolitical Risks to OPEC Oil Production (Iraq)
4. US, European Oil Stocks to Continue to Outperform
5. The PowerShares DB Commodity Index ETF (US code DBC) one way to play higher Brent crude oil, gasoline prices.