SECTOR ANALYSIS:
ENERGY SECTOR
SUJAN SHRESTHA
WHAT IS ENERGY SECTOR?
• According to Investopedia, Energy sector includes
“category of stocks that relate to producing or
supplying energy. This sector includes companies
involved in the exploration and development of oil
or gas reserves, oil and gas drilling, or integrated
power firms.”
ENERGY SECTOR AT BRIEF
• Performance in the sector is largely affect by the supply
and demand for energy.
• Sector performs well during times of high oil and gas
prices.
• Sector will earn less when the value of energy drops.
• This sector is fairly volatile and is sensitive to externalities.
• Oil hovering around $100 a barrel and improved
economic conditions in the U.S., energy stocks appear
to be a tremendous bargain.
SECTOR FACT
• Total market cap: 420,556.84 million
• Weight of top 10 constituents: 68.4 %
• Average P/E: 14.34
• Average EPS: $4.04
• Dividend Yield: 2.41%
Source: McGraw Hill Financial
ENERGY SECTOR VS. S&P 500
One Year Graph:
Ten Years Graph:
Source: McGraw Hill Financial
Source: Fidelity Investments
ENERGY SECTOR PERFORMANCE
(Source: MSCI USA IMI Energy)
ENERGY SECTOR IN NEWS
• OPEC raises oil demand forecast to 91.1 million barrels/day
– an increase of 1.14 million barrels/day
• Growing emerging economies demanding more energy
• Natural gas production has cut power prices and appears
to be contributing to the "reshoring" of manufacturing jobs
from overseas
• Ukraine crisis to affect Russian and European Union energy
demand/supply
ENERGY SUBSECTORS
(Source: MSCI USA IMI Energy)
SPENDING IN THE FUTURE
Source: KPMG 2013 Energy Outlook
OIL & GAS EXPLORATION AND
PRODUCTION
• Focus on finding, augmenting, producing and
merchandising different types of oil and gas.
• Energy fields such as shale, hydraulic fracking, and
other alternative source of energies are researched.
• High demand for more unexplored locations and
search for inexpensive operating venues
SWOT ANALYSIS
Strengths:
• Developing economy’s high
demand for energy.
• Market performer over the past
years.
• Diverse and international
marketplace.
Weaknesses:
• Volatile market industry.
• High expense and investment on
every aspect of industry.
• Government and international
organization (OPEC) regulated
industry.
Opportunities:
• Demand for energy will continue
to rise.
• Continued investment from
private and governmental
agencies.
Threats:
• Continued government and
international organization
interference.
• Highly concentrated market
industry.
• Liable to external factors.
STOCK PITCH
EOG Resources Inc. (NYSE : EOG)
I propose the class to buy 50 shares of EOG
Resources Inc. at a current price of $98.98,
expending a total of $4949.00
EOG RESOURCES INC.
•
•
•
•
•
•
•
Current price: $ 98.98
Market Cap: 50.79 Billion
Beta: 1.3
EPS: 4.11
P/E ratio: 23.12
52 week average: 56.03-100.36
Fortune 500 company situated in Houston, Texas.
EOG excels in oil and natural gas exploration and
production in the United States with proven reserves
in the US, Canada, Trinidad and Tobago, the UK,
and China.
EOG VS. S&P 500
EOG IN NEWS
• EOG’s Q4 earning on February 24th, 2014 posted a net
income earning of $548 million from $437 million the yearago quarter.
• EOG announced that the company oil production to grow
by 27 percent in 2014.
• EOG’s 2-for-1 stock split on March 17th, 2014
• EOG’s Eagle Ford Shale reported a 45% surge in energy
production capacity from 2.2 billion barrels to 3.2 billion
barrels during 2013
ANALYST ON EOG
• 19 out of 27 analysts (JP Morgan, Goldman Sachs, Morgan
Stanley, UBS, etc.) put EOG as a ‘Strong Buy’.
• According to the Motley Fool, “by 2018, EOG Resources
could be the top oil producer in America.”
• Jefferies Group propose a $210/share target in 2014 from
previous $195/share
QUESTIONS?
REFERENCE
• https://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Docume
nts/energy-industry-2013-outlook-survey.pdf
• http://www.msci.com/resources/factsheets/index_fact_sheet/msci-usa-imienergy-gross.pdf
• http://us.spindices.com/indices/equity/sp-500-energy-sector
• http://online.wsj.com/news/articles/SB1000142405270230491490457943475061
8125242
• http://www.reuters.com/article/2014/03/07/ceraweek-bernankeidUSL1N0M41LW20140307
• http://www3.valueline.com/secure/vlispdf/stk1700/vlispdf/f3101.pdf
• http://www.fool.com/investing/general/2013/12/29/the-best-energy-stocksfor-2014.aspx
• Google Finance
• Yahoo Finance
• Valueline