Aberdeen University Trading and
Investment Society
Energy Sector Overview
30/10/13
Structure
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Energy Sector Overview
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Subsectors
Growth
Analysis
Recommended Stocks (SWOT Analysis)
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Cairn Energy PLC (CNE) - Andrew Douglas
IGAS Energy PLC (IGAS) - Ally Dickson
Circle Oil PLC (COP) - Alex Nargol
Subsectors
• The 6 constituents of the energy
sector
• Renewable Energy Equipment
•Oil Equipment & Services
•Alternative Fuels
•Exploration & Production
•Pipelines
•Integrated Oil & Gas
• The rise of renewables
• Forward Thinking
Industry
1 Year
Change
Market Cap
(USD)
Renewable
Energy
Equipment
+131.39%
6.0bn
Oil
Equipment
& Services
+22.48%
711.0bn
Alternative
Fuels
+39.01%
85.8bn
Exploration
&
Production
+29.46%
1.6tn
Pipelines
+4.68%
464.0bn
Integrated
Oil & Gas
+2.25%
2.7tn
Growth
• Energy is fundamental global growth –
• Emerging Markets
• Which type of energy?
Analysis
Unique reasons for price movements:
• Price of oil - OPEC
• Government ‘responsibility’ - Green commitments
• Political instability – Syria, Libya, Egypt etc..
•Geological risk - Antarctic drilling
•Disappointing reserves - High start up costs
Stock Recommendation (SWOT)
Andrew Douglas
Stock recommendation: Cairn Energy PLC (CNE)
Cairn Energy PLC is one of Europe’s leading independent oil and gas
companies.
Their headquarters are located in Edinburgh and are a constituent of
the FTSE 250 on the London Stock Exchange.
•Operations
•UK & Norway
•Atlantic
•Mediterranean
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Strengths
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Weaknesses
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Slowdown in economic growth
Political and policy uncertainty
Opportunities
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20 Year Track Record
Strong Cash Flow – UK & Norway
Asset Value vs. Market Cap – $4,018.0m (June 2013) vs. $1,690.9m
(October 2013)
Risk Adverse
Exploration Profile - Different regions, more opportunity
18 month exploration period – Greenland, Morocco, Senegal, Ireland and
Spain
Rise of emerging markets – Push energy demand for years to come
Threats
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Miss drilling expectations
Europe instability
Stock Recommendation (SWOT)
Ally Dickson
• Stock Recommendation – IGas Energy plc
• IGas Energy is a leading British oil and gas explorer and
developer, producing approximately 3,000 barrels of oil and
gas a day from over 100 sites across the country, with
significant potential yet to be delivered from our assets.
• It is engaged in both unconventional and conventional
hydrocarbons on-shore in Britain. In the North West and
Staffordshire it has more than 500,000 acres under license.
• Largest publicly owned onshore oil and gas company in the UK
= SHALE GAS.
• Strengths:
• Licences for nearly all of UK onshore areas;
• Drilling appraisal wells in Staffordshire Q4 2013 – with an expected result
of between 20tcf – 170tcf of natural gas. The lowest estimate could power
the UK for 6 years; and
• Downside protection – 3000boe per day (revenues of £68.3m).
• Weaknesses:
• No ‘fracking’ licences yet – but applying after appraisal; and
• Debt – up front costs of o+g exploration ca. £200m.
• Opportunities:
• Licencee for a large chunk of the UK’s shale gas (see USA);
• UK Energy independence (see Grangemouth fiasco); and
• Government cooperation and accommodation (tax rates <32% from 81%);
• Threats:
• Greenpeace and other environmental campaigns – amelioration;
• Dry Wells; and
• Natural Gas pricing.