Oil Outlook

Oil _ Gas Industry Trends

Despite the numerous changes in structure and world market fluctuations, the oil and gas sector continues to return record profits. While analysts do not agree on when or how prices will be affected by the current economics, they are unanimous in their call for continued high prices for the foreseeable future. Some are even calling for new “super spikes” in pricing that could send oil over $105 a barrel (Goldman Sachs). Few serious researchers expect that fossil fuels will return to pre-boom pricing.

These economics have created a virtual boom in petroleum exploration and development. Small to medium sized independent companies have moved into the market in an attempt to fill the intense demand for oil, natural gas and distillates.

Driving Growth

Texola Energy should benefit from several major growth drivers in the years ahead. These factors are also responsible for much of the recent surge in prices, but are likely to persist according to industry experts:

  • Rising oil demand in China and India
     

  • Underinvestment in drilling and refining capacity
     

  • Slow discovery of new reserves
     

  • A shortage of refining capacity in the U.S.
     

  • Reduced imports from Canada and Mexico

All of these factors combined mean that junior, independent exploration and development companies will see high prices for any reserves they acquire and production that is brought online for the foreseeable future

Profitability

At present, the energy industry is proving very profitable for investors. The stock prices of the 29 oil and gas companies on the S_P 500 are up by 31.2% in 2005. Of those large, integrated companies, 19 are up by 36.3% over the last twelve months and the best performer, Valero Energy, is up 110% for the last twelve months.  While these represent only the upper percentile of the blue chip companies, many analysts are suggesting that the real profitability for energy lies within the small cap companies, such as Texola Energy. Their rationale is simple; small cap companies such as Texola Energy Corp. offer:

  • The ability to grow faster than majors
     

  • Pure play investing in either exploration and production or asset growth
     

  • Slow discovery of new reserves
     

  • Immediate payback for interests acquired
     

  • Strong targets for takeover as larger players seek to diversify

 

 

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