Aberdeen University Trading and Investment Society

Energy Sector Overview30/10/13

Structure• Energy Sector Overview

• Subsectors• Growth• Analysis

• Recommended Stocks (SWOT Analysis)• Cairn Energy PLC (CNE) - Andrew Douglas• IGAS Energy PLC (IGAS) - Ally Dickson• Circle Oil PLC (COP) - Alex Nargol

Subsectors• The 6 constituents of the

energy sector• Renewable Energy Equipment

• Oil Equipment & Services

• Alternative Fuels

• Exploration & Production

• Pipelines

• Integrated Oil & Gas

• The rise of renewables

• Forward Thinking

Industry 1 Year Change

Market Cap (USD)

Renewable Energy

Equipment+131.39% 6.0bn

Oil Equipment & Services

+22.48% 711.0bn

Alternative Fuels +39.01% 85.8bn

Exploration &

Production+29.46% 1.6tn

Pipelines +4.68% 464.0bn

Integrated Oil & Gas +2.25% 2.7tn

Growth• Energy is fundamental global growth –

• Emerging Markets

• Which type of energy?

AnalysisUnique reasons for price movements:

• Price of oil - OPEC

• Government ‘responsibility’ - Green commitments

• Political instability – Syria, Libya, Egypt etc..

• Geological risk - Antarctic drilling

• Disappointing reserves - High start up costs

Stock Recommendation (SWOT) Andrew Douglas

Stock recommendation: Cairn Energy PLC (CNE)

Cairn Energy PLC is one of Europe’s leading independent oil and gas companies.

Their headquarters are located in Edinburgh and are a constituent of the FTSE 250 on the London Stock Exchange.

• Operations• UK & Norway• Atlantic• Mediterranean

• Strengths• 20 Year Track Record• Strong Cash Flow – UK & Norway• Asset Value vs. Market Cap – $4,018.0m (June 2013) vs. $1,690.9m

(October 2013)• Risk Adverse • Exploration Profile - Different regions, more opportunity

• Weaknesses• Slowdown in economic growth• Political and policy uncertainty

• Opportunities • 18 month exploration period – Greenland, Morocco, Senegal, Ireland and

Spain• Rise of emerging markets – Push energy demand for years to come

• Threats• Miss drilling expectations• Europe instability

Stock Recommendation (SWOT) Ally Dickson

• Stock Recommendation – IGas Energy plc

• IGas Energy is a leading British oil and gas explorer and developer, producing approximately 3,000 barrels of oil and gas a day from over 100 sites across the country, with significant potential yet to be delivered from our assets.

• It is engaged in both unconventional and conventional hydrocarbons on-shore in Britain. In the North West and Staffordshire it has more than 500,000 acres under license.

• Largest publicly owned onshore oil and gas company in the UK = SHALE GAS.

• Strengths:• Licences for nearly all of UK onshore areas;• Drilling appraisal wells in Staffordshire Q4 2013 – with an expected result

of between 20tcf – 170tcf of natural gas. The lowest estimate could power the UK for 6 years; and

• Downside protection – 3000boe per day (revenues of £68.3m). • Weaknesses:

• No ‘fracking’ licences yet – but applying after appraisal; and• Debt – up front costs of o+g exploration ca. £200m.

• Opportunities:• Licencee for a large chunk of the UK’s shale gas (see USA);• UK Energy independence (see Grangemouth fiasco); and• Government cooperation and accommodation (tax rates <32% from 81%);

• Threats:• Greenpeace and other environmental campaigns – amelioration;• Dry Wells; and• Natural Gas pricing.