What are we looking for?
The International Energy Agency recently predicted that the United States will overtake Saudi Arabia and Russia to become the world’s top oil producer by 2017. The IEA also forecasts that the U.S. will be self-sufficient in energy by 2035, a previously unthinkable situation. My colleague Rob Belanger and I thought we would have a look at U.S. oil producers.
We ranked these companies by the price to barrel of oil equivalent (BOE). This is the current share price as a multiple of the company’s combined oil and gas reserves per share. A low number indicates the company may be undervalued relative to its peers. Other criteria include:
Recycle ratio, which measures the efficiency of turning a barrel of reserves into a barrel of production. The more profitable companies have higher ratios.
Reserve replacement ratio, which indicates the percentage of the oil and gas reserves consumed by production during the year that were replaced through acquisition, improved recovery, new discoveries and net purchases. Once again, the higher the ratio, the better.
Reserve production ratio, which shows the life in years of the company’s existing oil reserves – assuming it continues to pump oil at the same rate without adding any reserves.
Finding and development BOE, or the average cost over three years of adding one BOE to the company’s reserves through exploration and development. The lower figure, the better.
Finally, we want a low price-to-cash-flow ratio.
What did we find?
No one company scored well in every category. BreitBurn Energy concentrates most of its activity in the Los Angeles basin, and looks interesting. The same can be said for ConocoPhillips, the fifth-largest refiner in the world.
One thing is for certain. Since Canada exports virtually all of its oil to the U.S., this potential surge in American production could seriously affect Canada’s future. Longer term, oil patch investors just might want to shift some assets south of the border.
Close-up on U.S. oil companies
|Berry Petroleum A||BRY-N||3.77||1.88|
Wickham Investment Counsel Inc.; Bloomberg
|Company||Ticker||P/CF||Recycle Ratio||Res. Replacement Ratio||Res. Production Ratio||Prod Mix Oil (%)||F&D BOE||Price to BOE|
|Berry Petroleum A||BRY-N||3.77||1.88||128.51||20.6||69.4||17.56||6.41|
|Vanguard Natural Res.||VNR-N||6.11||4.51||305.20||19.1||61.1||19.68||16.36|
|Exxon Mobil Corp.||XOM-N||7.76||5.42||107.24||14.5||51.3||14.14||16.89|
|Northern Oil & Gas||NOG-A||5.96||2.72||1714.59||23.4||93.1||13.47||22.30|
- Breitburn Energy Partners LP$0.33-0.03(-9.54%)
- Clayton Williams Energy Inc$18.13-1.59(-8.06%)
- Resolute Energy Corp$0.64+0.10(+19.03%)
- Apache Corp$54.40-1.03(-1.86%)
- Hess Corp$59.62+0.44(+0.74%)
- Marathon Oil Corp$14.09-0.26(-1.81%)
- Denbury Resources Inc$3.86-0.20(-4.93%)
- Whiting Petroleum Corp$12.00+0.23(+1.95%)
- Vanguard Natural Resources LLC$1.74-0.01(-0.57%)
- Exxon Mobil Corp$88.40+0.37(+0.42%)
- Legacy Reserves LP$3.12+0.12(+4.00%)
- Occidental Petroleum Corp$76.65+0.42(+0.55%)
- Concho Resources Inc$116.17-2.86(-2.40%)
- Northern Oil and Gas Inc$5.46-0.04(-0.73%)
- Continental Resources Inc$37.26-0.70(-1.84%)
- Updated April 29 4:00 PM EDT. Delayed by at least 15 minutes.