Tags: US | energy | drilling | oil

USA Today: Burgeoning US Energy Industry Is Great for Stock Investors

Friday, 14 Jun 2013 11:38 AM

By John Morgan

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A historic increase in U.S. energy production and big newly tapped supplies are unexpectedly creating opportunities for investors, according to USA Today.

The United States is the fastest-growing oil producer among the non-Organization of the Petroleum Exporting Countries, and its oil production is now more than 7 million barrels daily, up sharply from 5.7 million barrels in 2011, according to government figures.

Oil services companies, refiners, chemical firms and rails are all beneficiaries of the U.S. energy renaissance, USA Today said.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

Derek Rollingson, portfolio manager for ICON energy fund, recommends Oceaneering (OII), an oil services firm that caters to offshore oil and gas drillers.

Will Riley, co-manager of the Guiness Atkinson Global Energy Fund, is another oil services bull, and is high on Helix Energy (HLX), which provides cleanup services for spills in addition to offshore drilling services.

"The U.S. needs deep-water oil — it's a vital source of supply for the country," Riley said.

Refiners are also starting to shine, and will do even better if crude prices go down, Rollingson told USA Today.

"Profitability goes up when prices go down," he explained. "You don't pay 10 percent less at the pump the next day if oil prices go down 10 percent." Rollingson recommended Valero (VLO) and Phillips 66 (PSX) in the refiner category.

Ted Davis, manager of Fidelity Select Natural Gas, said chemical companies are among the biggest beneficiaries of less expensive natural gas because they use lots of energy to produce their products.

Davis also likes railroads because new energy supplies need to be transported from the interior of the United States to coastal refineries. "Rail has become a reasonably efficient stopgap in allowing crude to make it to market," he said.

However, some analysts believe the U.S. energy industry will not be able to maintain its "blistering growth," Canada's Financial Post reported.

AllianceBernstein, a Wall Street research firm, estimated the current marginal cost of crude in the United States stands at around $95 per barrel, which could makes new production particularly vulnerable in the event of a price collapse.

Bart Demosky, chief financial officer at Suncor Energy, predicted tight oil supplies are here to stay, and that the United States will remain a larger importer of crude oil.

"There is no consensus what the ultimate [U.S.] production is going to be," Demosky told an industry conference this week in Montreal, according to the Post.

Editor's Note: I Wish I Were Wrong — Economist Laments Being Right. See Interview.

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