Pescod Quotes Verbonac of OctagonIt’s the time of year that analysts, forecasters and the
like are expected to deliver what their crystal ball is suggesting
for the next 12 months and much of this reading is
of a very interesting nature.
Warren Verbonac of Octagon Capital has just put out his
effort and many of his stories are featured in the North Sea,
an area which is suddenly looking much more appealing
because of their royalty-free tax policies.
Some of his comments such as his outlook on oil and
gas…“We are forecasting a more modest 22% improvement
in the 2010 annual average to US$75/b (for oil). Oil
inventories remain high and the slight degree of overproduction
will temper the upward price momentum of the
commodity until economies recover.” He also points out
that “motorists in the U.S. drove fewer miles in 2009 for the
second year in a row.”
The intriguing market for the year ahead could be in
natural gas where there is just so much supply one tends
to worry just how low it can go. Verbonac writes on the
gas markets, “Our US$4.50/mcf gas price forecast for 2010,
while a 17% improvement over 2009, is far from being high
enough to provide adequate producer returns in North
America….” Enough said!
As far as picking stocks in 2010? Verbonac writes, “The
key to this year’s investment strategy will be selecting
stocks with a strong production-profile—preferably oilleveraged…
In the international universe, the leading investment
opportunities are characterized by large development
projects that are at least partially funded by equity and
cash flow...Exploration, essential for long-term growth, is
beginning to make a comeback as risk capital is gradually
becoming available…”
Ithaca Energy, another North Sea player he points out
has to be watched because it is “currently cash flowing
over $100 million on an annualized basis and is still undervalued
on a cash flow multiple basis.”
***One thing Verbonac and other analysts are pointing
out is that it is going to be a lot tougher to come up with
winners in the coming year as oil and gas have already
bounced back a bunch and oil and gas stocks that were
selling at “depression-like” prices six and eight months
ago, are now much closer to more realistic valuations.
A stock pickers market in the year ahead.