Attractive Futures for PetroChina & Encore Acquisition

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 (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 (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.

Originally Written on December 12, 2006