Stock of this energy company is up 44% since mid-September, five times more than energy ETFs. It is up 360% since August 2020, more than twice that of energy funds.
Does that make sense? Yes, for two reasons. Oil will trade a lot higher next year, and energy stocks are still cheap.
Large-cap exploration and production companies recently traded at 3.7 times EBITDA . Historically they have traded between four and six times, Cook says. Energy stocks make up 5% of the S&P 500 SPX, +0.75% — that’s well below the 8% average over the past 10 years.Cook is worth listening to because his Hennessy fund beats competitors in the energy equity category by 6 percentage points annualized over the past three years, according to Morningstar.
1. China will reopen China’s economy will pick up as zero Covid policies are eased and the government offers stimulus, says Blanch. “China needs to reopen because the U.S. and Europe will be in recession or close to it. So, China will face a tough time since it has been living off European and U.S. demand,” he says. Reopening would boost China’s oil demand by 5%.
To make matters worse, investment in new capacity lags. Blanch estimates it will hit $400 billion this year. That is low, historically. The last time oil averaged more than $100 per barrel in 2014, that figure was $761 billion for the year. “The global rig count is now half as sensitive to oil prices than it used to be. Historically, periods of very low spare capacity have been associated with higher than average realized oil prices,” says Blanch.
He also says U.S. shale production inventory has fallen to a 10-year supply. “Doubling drilling brings inventory down to five years, and then your company is over,” he says. And the shale that remains is less productive. “The U.S. is no longer the swing producer,” concludes Blanch. Energy Transfer LP This midstream energy transport limited partnership benefits from increased natural gas demand in the U.S. and abroad. It also has a Lake Charles liquid natural gas plant that may get cleared to operate over the next several months, says Cook.
Comstock Resources Comstock Resources Inc. CRK, -3.95% is a natural gas producer in the Haynesville shale in North Louisiana and East Texas, an advantage since this is close to Gulf Coast LNG export plants.
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