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2006-06-23 :: Positive News on Energy Stocks!

Below is a story from CBS Marketwatch on the internet with extremely positive comments about the energy sector.  I thought you might want to see that I am not alone in my support for the sector.  Let’s see if it translates into some price gains today!

Deutsche Bank lifts oil majors’ weighting

Raises Royal Dutch Shell, Statoil recommendations to buy

LONDON (MarketWatch) — Deutsche Bank raised its oil price estimates for the next two years and for the longer-term on Friday, prompting increased price targets and earnings estimates for a number of heavyweight global oil companies and recommendation upgrades on two European majors.
The bank said that, with economic growth remaining robust and few signs that the geopolitical price premium will dissipate over the next several months, it has again raised its energy price estimates.

It said that it now expects West Texas Intermediate oil prices to average $62 a barrel in 2007, from a previous estimate of $50 a barrel, and $55 a barrel in 2008, from a previous estimate of $45 a barrel. It also raised its long-term WTI forecast to $45 a barrel from $40 a barrel.
“The bulk of the evidence on the likely sustainable level of energy prices suggests it is increasingly implausible that we are headed back to the $25 a barrel oil and $3.00/mmBtu gas forecasts that dominated consensus views in the 1990s,” the bank said.
Deutsche Bank added that, even though it last raised oil prices estimates only three months ago, it now believes that the threat of energy-price declines in the next twelve months is receding.  The time required to correct underinvestment seems to point toward 2008-2010 as a more realistic range than 2006-2007, it said.

Following the oil-price forecast increases, it raised target prices across the European integrated-oil sector and also upgraded earnings estimates for U.S. majors.
In Europe, the bank raised target prices across the sector by between 5% and 7%.
“On revised price targets, we raise both Royal Dutch Shell.
Royal Dutch Shell shares climbed 1.8% in London while Statoil rose 1.9% in Oslo.
Estimates for earnings per share were lifted across the sector by around 20% for fiscal 2008, while free cash flow estimates increased 30%.

“With the sector now expected to generate some $182 billion of excess cash over this period. We would expect a very significant proportion of this to find its way through to shareholders either through increased buy-backs or additional dividend returns,” it said.
Deutsche Bank’s other preferred European names remain BP, OMV, ENI S.p.A. and Total.   “Of the super-majors, Total in particular looks substantially undervalued,” the bank said. Total shares gained 1.6% in Paris.

Meanwhile, the bank’s U.S. oil company analysts said that another extremely strong quarter for earnings has not been reflected in market estimates for earnings per share.
“We think the market is excessively discounting the potential for demand weakness and returns dilution, because we are, and we find plenty of value in oil,” they said.
These analysts added that, based on pre-existing price targets, they see around 16% upside in the integrated oil group over the next twelve months.