Marcman / All / Natural gas focus
Excerpts from the 1998 Canadian Resource And Energy Investment Conference held in Vancouver recently.
Ian Doig
Ian Doig, the publisher of Doig's Digest, was one of the most knowledgeable speakers at the conference. As he guided the crowd through the many scenarios that could emerge in this industry the touched on a couple of very key points for investors to consider. Firstly he discussed the fact that many of the new gas pipelines being constructed in Alberta to transport gas would have to be filled by someone. He suggested that most of this new gas would have to "come from the drill bit," referring to the fact that more new discoveries are needed. According to Doig, this could lead to an area play developing in the Alberta foothills region located just south of Calgary, and Doig suggested investors keep and eye on this region. Another oil area play that Doig said was just now heating up was the area off the shores of West Africa and nations such as Angola. Doig noted that recently the entire West African region could make this develop into somewhat of an area play for investors to follow. The somber note from Doig's seminar was that there would be less demand for oil in the near future, but this was tempered by the fact Doig believed the demand for gas would increase, thus providing some options for investors in the energy sector.
Michael Chapman
Mr. Chapman joined Ian Doig and Kevin Smith on the conferences' oil and gas panel. The panel, which was in general not to optimistic, did have some good advice for investors. Mr. Chapman stressed that investors should be aware that the lessened demand for oil would adversely effect the cash flow of the major producers. This lack of cash could effect their share price and so Mr. Chapman suggested investors stay away from major oil producers and instead look at other options. The other options identified by Mr. Chapman were the mid-sized junior oil and gas exploration companies who could increase their value and core assets during these periods and provide some good returns for investors in the future.
Kevin Smith
Kevin Smith, although claiming to have far less experience than his panel counterparts, made some very key points about investing in Canadian energy sector stocks. The major point made my Mr. Smith was that the best thing going for both Canadian oil producing companies and oil service companies was that they could export their vast knowledge of the industry to parts of the world where production costs were much less, thus making returns more attractive. This argument was backed up strongly by Ian Doig, who also noted that the number of Canadian oil and gas companies operating overseas was increasing every year. Kevin Smith noted that investors should be aware that there is a lot of growth potential for Canadian companies outside of Canada, and investors should be aware of their potential, even if the oil sector as a whole is experiencing some problems. Smith also tried to have some fun with investors saying that they should be aware of a
potential move by US President Clinton against Iraq as a tactic to divert the attention away from his "domestic
problems."
Haz Comments
I believe that Natural Gas pricing will start to trend up slowly, Canadian prices have already starting to climb from recent lows caused by warmer weather.
Then as new pipeline capacity comes on stream starting in q4 98 and increasing steadily for a couple of years, natural gas demand from the US will continue to increase. The price spread between US pricing and CND pricing will close from current wide 1.50 CND to 2.30 US and CND producers will benefit to the tune of millions of dollars.
Of course CND consumers will also have to pay for higher gas prices in the coming years but I don't mind paying a few hundred dollars more per year if I'm making thousands with my gas stocks.
The major task now is to identify companies that can take advantage of this move to natural gas and find and develop economical reserves at a low production cost will be the big movers in 1998.
Also in these current capital markets, companies will need steady cashflow and or cash in hand to explore for and develop these reserves. Once they prove they can add reserves economically then the markets will finance further gas discoveries.
Cheers and good investing |
