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Oil Shares Signal a Rebound; Pickens Predicts Reco
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singaporegal
Supreme |
27-Nov-2006 22:11
Yells: "Female TA nut" |
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I gave up trying to predict Oil prices ... its too volatile and dependent on too many factors (environment, natural disasters, terrorism, politics...etc.) that TA cannot predict. Because of this, I usually don't bother with counters like SPC that get affected by oil alot. |
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lg_6273
Elite |
27-Nov-2006 15:11
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By Matthew Leising Nov. 27 (Bloomberg) -- Oil stocks are signaling that crude prices may rebound to a record in 2007. Shares of Nymex Holdings Inc, owner of the biggest energy exchange, have more than doubled since their Nov. 16 sale, the best performance for any initial public offering this year. The value of energy industry IPOs in 2006 is more than double that of last year, reaching $7.4 billion after KBR Inc., the builder of liquefied natural gas plants and refineries, raised $473 million Nov. 15. Benchmark U.S. crude oil is likely to average $70 a barrel next year, according to Dallas hedge fund manager Boone Pickens. Economist Ed Morse at Lehman Brothers Inc., the fourth-largest U.S. securities firm, predicts $72. Either would top the average price for New York oil futures so far this year, $66.73 a barrel, and set a record. ``I keep thinking we're right at the bottom on oil,'' Pickens, who has correctly predicted rising energy prices for the past three years, said in a Nov. 22 interview. ``I don't see why the run is over if the global economy continues to grow.'' Earnings from the world's largest oil companies will likely reach an all-time high this year because crude prices so far are about $10 a barrel above the 2005 average of $56.70. Revenue at Exxon Mobil Corp., Chevron Corp., ConocoPhillips and Marathon Oil Corp. totaled $777 billion last year, more than the economies of Mexico, India or Russia. ``People have been beating up on energy stocks lately, but there aren't a lot of other sectors out there making that kind of money,'' said David Foley, who helps manage $600 million at Grove Creek Asset Management in New York. No Collapse Investment strategists including James Paulson of Wells Capital Management in Minneapolis said this summer that energy markets had peaked and were poised to collapse. Crude oil dropped as much as 30 percent from a record $78.40 a barrel on the New York Mercantile Exchange in July to its low this month. Natural gas futures, falling all year as inventories of the fuel swelled, reached a four-year low in September. Gas has almost doubled in the two months since then. When the prices for oil, fuels and natural gas start to rise may depend on how quickly winter weather spreads across the U.S., Pickens said. So far, warm temperatures have kept demand for heating fuels in check. As recently as July, when both oil and natural gas were falling, Halliburton Co. had expected to shelve the sale of its KBR unit because of a lack of demand. Instead, the IPO was completed with shares selling at $17, the top of the range the company predicted, and gaining 22 percent in their first day of trading. Rigs and Refineries ``The outlook is very strong,'' said Jason Putman, an analyst who helps manage $60 billion at Victory Capital Management in Cleveland. Putman's firm bought shares of KBR on optimism it will benefit from a building boom in LNG terminals. ``The next three to five years look about as good as they ever have for LNG, and for energy in general.'' Oil producers and refiners have been unable to keep pace with rising global demand for crude oil and refined fuels, and prices have doubled in the past three years. ``There are no clear signs that enough capital has yet been deployed in this sector to alter fundamentally today's tight conditions,'' according to a note to clients from Morse, Lehman's chief energy economist. ``A generation of underinvestment in the sector lies behind recent capacity constraints,'' Morse wrote. Nymex IPO Energy-related IPOs raised $3.7 billion in the U.S. last year. Just three years ago, no energy companies went public. Nymex sold its shares for more than underwriters forecast in its initial share offering, and they still jumped more than 125 percent the next day on the New York Stock Exchange. Oil has rallied for almost five years as fuel needs rose, especially from China, leading to record prices. Oil ended last week at about $60 a barrel. Natural gas prices peaked at over $14 per million British thermal units in December, up from an average of $2 during the 1990s. Energy companies are selling shares to finance new projects, including Reliance Industries Ltd., owner of India's largest refinery. Reliance sold stock in its Reliance Petroleum Ltd. unit earlier this year, raising $601 million for construction of a 580,000 barrel-a-day refinery. Buyers ordered 50 times more shares than were available, according to the underwriters. Reliance Petroleum shares surged 42 percent after their first day of trading. They have since lost 21 percent. ``Oil companies will continue to do well because there is a lot of expansion needed both in exploration and refining,'' said Praveen Martis, an energy analyst at U.K.-based Wood Mackenzie Consultants Ltd. ``The energy story is far from over.'' Good Market ``We are in a good oil and gas market and investors are trying to take advantage of that,'' said David Frischkorn, a managing partner at Dahlman Rose & Co., a New York-based brokerage that specializes in energy and shipping. ``Cash flows have been very, very good and will continue to be good.'' Investors shouldn't mistake a good IPO performance for underlying strength in an equity, said T. Rowe Price Group Inc. energy analyst Tim Parker, whose firm bought Nymex shares. ``It's more a function of investor enthusiasm than fundamental strength,'' he said in a Nov. 21 interview. Parker says oil prices will stay around today's level for about a year and then begin to rise. He expects Russia and other countries outside of OPEC to add 1.5 million barrels of crude oil production capacity next year, helping to meet ever-rising demand. By the end of next year, $60 crude will ``feel more like a floor than a ceiling,'' he said. ``It'll be difficult for non- OPEC supply to consistently meet demand growth.'' The increase in energy IPOs reflect confidence that enough oil and gas can be found to exploit today's high prices, said Daniel Yergin, chairman of energy consulting firm Cambridge Energy Research Associates and author of ``The Prize,'' the Pulitzer prize-winning history of the oil industry. ``This is a growth period as the industry rebounds from the contraction it went through five or six years ago,'' he said. |
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