Mackie Research said that three companies -- , , and Valeura energy -- should perform well in 2016 despite low oil prices.
After peaking at US$107/bbl in June 2014, the price of crude oil has collapsed, falling 71% to close yesterday at just US$32.05/bbl, nearing a 12 year low.
The TSX Oil & Gas index has lost 56% of its value over the same time period. “It’s been a terrible start” to 2016 with the price of oil falling 15%, driven down by jittery markets in China and elsewhere, while the oil market remains oversupplied with resilient US shale production, record OPEC production and the lifting of sanctions on Iran, analyst Bill Newman said in a research note to investors on Thursday.
He said thwith shifting supply and demand forecasts, it’s difficult to predict when the oil market will balance, but eventually it will, as massive cuts to capital spending takes a toll on non-OPEC supply.
With an uncertain oil price outlook, Mackie Research has decided to highlight three companies with limited exposure to weak oil prices.
Mackied suggested that (), () and Valeura Energy (CVE:VLE) are all set for substantial production and cash flow growth in 2016, primarily funded with internally generated cash flow.
“Despite our positive outlook, these companies have not been immune to the market turmoil,” Newman wrote.
He said that he believes these companies will perform well in 2016 as they achieve production milestones and are exposed to a second lift once the E&P sector is back into favor again.