Interesting pattern in today’s big winners on the New York Stock Exchange: the list is dominated by the names of relatively small, predominantly domestic energy producers.
As of the end of trading in New York today you would have found these stocks among the big percentage winners: Oasis Petroleum (OAS) up 5.9%, Brigham Exploration (BEXP) up 3.4%, Ultra Petroleum (UPL) 4.6%, Swift Energy (SFY) up 3.22%, Chesapeake Energy (CHK) 8.1%, and Berry Petroleum (BRY) up 4.9%.
These energy companies don’t have a whole lot in common—some natural gas producers (Ultra Petroleum and Chesapeake Energy); some produce oil from oil shales (Oasis and Brigham); some work in traditional fields in California (Berry).
But they do have in common a lack of exposure not just to Egypt but also to the Middle East. They’re up as a bet that we’re seeing the beginning of a wave of instability in the region that will make oil from “safe” sources increasingly valuable.
I don’t think I’d chase these here—although I don’t think this trend is over or a flash-in-the-pan, I just don’t want to buy after 10% gains in just two days.
If you like the logic of these stocks, however, I’d suggest that you take a look at oil producers from Canada’s oil sands. Every time the risk of Middle Eastern oil goes up, the more likely it is that developing these huge fields will go full-speed ahead despite all the very real environmental costs of producing oil from Alberta’s oil sands. Suncor Energy (SU), which is very focused on producing oil from this source, is up a 3.8% today. Shares of Norway’s Statoil (STO), not thought of as an oil sands player, is up just a little less than 1%. On January 27 Statoil announced first production from its 60% owned Leismer oil sands project. The first phase is projected to produce 18,000 barrels a day within 24 months. A second phase plus expansion of Leismer will take production to 80,000 barrels a day within five years.
(Just for reference, Egypt, which consumes much of its oil production domestically, exports roughly 89,000 barrels of oil a day.)
Full disclosure: I don’t own shares of any of the companies mentioned in this post in my personal portfolio. The mutual fund I manage, Jubak Global Equity Fund, may or may not now own positions in any stock mentioned in this post. The fund did own shares of Brigham Exploration, Oasis Petroleum, and Statoil as of the end of December. For a full list of the stocks in the fund as of the end of December see the fund’s portfolio at http://jubakfund.com/about-the-fund/holdings/.