Tracking Energy Producers' Cash Flow

Overcoming political, economic and financial challenges in 2009, large cap oil and gas producers generated almost the same cash flow relative to marker oil price in the first quarter as in the record year 2008. Median Ebitda of $17 a barrel was about two-fifths of $43 a barrel of Light, Sweet Crude Oil price in early 2009 just as median Ebitda of $41 a barrel was about two-fifths of $100 a barrel for average benchmark oil price in 2008.

Meanwhile as U.S. political leaders debate taxing that cash flow more, we are optimistic that the risks of negative action will be tempered by realization that globally competitive companies are vital for economic growth. To diversify political risk, we suggest that large cap oil and gas investments be weighted about equally in each of five groups -- U.S. Integrated, Europe, Brazil/Russia/China, U.S. Independent and Canada. Twenty-one of the twenty six stocks in our large cap coverage are buy recommendations.

Examples with low McDep Ratios and stock prices above the 200-day average include StatoilHydro (STO), PetroChina (PTR), Anadarko Petroleum (APC) and XTO Energy (XTO). Finally, long-term oil at the recent average of $71 a barrel for futures prices for the next six years approaches the 40-week average of $77.

Originally published on May 19, 2009.

Comments

[isaac the t...:]

thank you

Jun 11 11:25 PM