CHICAGO, Jan. 28, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Oil & Gas Industry, including: Royal Dutch Shell plc (NYSE: RDS.A), PetroChina Company Limited (NYSE: PTR), Sasol Ltd. (NYSE: SSL), Core Laboratories N.V. (NYSE: CLB) and Halliburton Co. (NYSE: HAL).
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A synopsis of today's Industry Outlook is presented below. The full article can be read at http://www.zacks.com/stock/news/46668/Oil+%26amp%3B+Gas+Industry+Outlook+-+Jan.+2011
In this current turbulent market environment, we advocate the relatively low-risk energy conglomerate business structures of the large-cap integrateds, with their fortress-like balance sheets, ample free cash flows even in a low oil price environment and growing dividends. Our preferred name in this group remains Royal Dutch Shell plc (NYSE: RDS.A).
Royal Dutch Shell's recent quarterly outperformance has been driven by higher energy prices, operational and production efficiency, and contributions from its growth programs. The company has been able to boost returns and remain competitive in this difficult environment by embarking on aggressive cost reduction initiatives, exiting unprofitable markets and streamlining the organization.
The current oil price environment should also benefit producers, particularly those international players having attractive growth opportunities in their home markets. One such standout name is China's PetroChina Company Limited (NYSE: PTR), which remains well-placed to benefit from the country's growing appetite for energy and the turnaround in commodity prices. Being one of two Chinese integrated oil companies, PetroChina is well-positioned to capitalize on these favorable trends.
We are also positive on South African petrochemicals group Sasol Ltd. (NYSE: SSL). Sasol's highly-developed technical expertise in producing synthetic fuels in commercial quantities from low-grade coal and natural gas gives it a competitive edge over other industry players. A robust balance sheet and strong cash position are other positives in the Sasol story.
In recent times, Sasol has continuously focused on the commercialization of its gas-to-liquids (GTL) technology to capitalize on the opportunity to leverage the arbitrage between gas and oil prices. Under normal circumstances, the ratio of the price of oil (measured in $ per barrel) to the price of natural gas (in $ per million British thermal units) fluctuates between 6 and 12.
However, in recent times, this has decoupled to an unprecedented degree, up at around 20. With gas prices remaining at depressed levels and thereby diverging significantly from oil prices, Sasol is looking to utilize the spread by using its GTL technology.
Within the oilfield services group, we like Core Laboratories N.V. (NYSE: CLB). We are a fan of Core Labs' leadership position in the reservoir optimization niche, along with its global footprint and deep portfolio of proprietary products and services. Furthermore, the company's low asset intensive operations and limited capex needs allow it to generate substantial free cash flows.
Halliburton Co. (NYSE: HAL), the world's second-largest oil services firm, is also a top pick. We like Halliburton's leading position in the global oilfield services market, its broad and technologically-complex product and service offerings, and its robust financial profile. The company's recent results have been driven by strong demand for its services in North America and improvement in activity in a number of international markets including Norway, West Africa, Iraq and Algeria.
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