Raise Oil's Present Value 15% Outside North America

On the basis of a long-term oil price expectation of $80 a barrel, up from $66, we raise estimated present value [PV] of world oil production and natural gas production outside North America by 15%. Six-year futures for oil are currently $87 and the next twelve months futures average $90.

Recent tax increases in Alaska and Alberta hold back oil PV from increasing as much as the 21% increase in price. PV remains unchanged for natural gas in the U.S. and Canada tied to a long-term price of $11 a million btu and downstream refining/marketing globally tied to a refinery crack of $11 a barrel.

Typical McDep Ratios decline to 0.8 from about 0.9 depending on the mix of properties and debt. Mega Caps like buy-recommended ConocoPhillips (COP) and producer/refiners like buy-recommended Statoil (STO) look more attractive statistically than previously.

Devon Energy (DVN) continues to look strong among independent producers. Raised a full 15% in PV as a pure oil producer, Canadian Oil Sands Trust (COSWF.PK) becomes more attractive statistically among income stocks.

Originally published on December 18, 2007.