Attractive Futures for PetroChina & Encore Acquisition

 |  Includes: EAC, PTR
by: Kurt Wulff

Patient investors in oil and gas buy recommendations ought to be well rewarded should our vision of $150 a barrel for light, sweet crude oil in 2010 materialize. Even today’s futures price of $67 for 2010 implies an attractive outlook for oil stocks, natural gas futures and natural gas stocks. Considering that a McDep Ratio of 1.00 relates to $60 oil, a composite McDep Ratio of 0.81 for individually weighted recommendations suggests stocks may be priced for $49 oil.

A top performing stock like PetroChina (NYSE:PTR) has more potential, at the same time experience tells us that the same stock is not always the leader in the portfolio for every time period. Similarly a stock with lagging performance recently like small cap Encore Acquisition (NASDAQ:EAC) is likely to appreciate again, perhaps benefiting soon from a “January effect”. The 28 buy recommendations compose a portfolio that is weighted equally between U.S. and non-U.S., and by business is concentrated 42% natural gas, 48% oil and 10% downstream.

ptr graph

Originally Written on December 12, 2006