Transcription of Finance News Network Interview with Patersons Securities oil and gas analyst Alexis Clark Lelde Smits: Hello I’m Lelde Smits for the Finance News Network and joining me today from Patersons Securities is oil and gas analyst, Alexis Clark. Alexis, welcome to RIU’s Good Oil Conference here in Perth.
Alexis Clark: Thanks very much for having me.
Lelde Smits: What do you believe are some of the most exciting developments occurring in the oil and gas sector at the moment?
Alexis Clark: I think the key development that is happening in the Australian market is the rollout of the unconventional revolution. We saw that is the US and it is now kick starting in Australia with a number of large cap EMP’s coming into the market.
Lelde Smits: And overall what would you identify as the most promising projects across Australia?
Alexis Clark: It think some of the key projects in the Cooper Basin are probably the most promising. Companies such as Drillsearch Energy Limited
(ASX:DLS), Beach Energy Limited
(ASX:BPT), Senex Limited
(ASX:SXY), have some really exciting projects in the Cooper Basin with strong conventional production and a lot of unconventional upside.
Lelde Smits: Taking a closer look at stocks – As oil and gas analyst focused on small to mid cap stocks in Australia, who’s currently grabbing your attention?
Alexis Clark: I think, as I mentioned, Drillsearch Energy Limited
(ASX:DLS) is a real standout. They’ve got significant conventional production, they’ve done some great deals with BG Energy and a recent deal with Santos Limited
(ASX:STO), and they’ve got significant unconventional upside. That’s really a top pick in the sector.
Lelde Smits: And could you give us an idea of some undervalued energy stocks we should have on our radar?
Alexis Clark: One I really like is a company called Sino Gas & Energy Holdings Limited
(ASX:SEH)listed on the ASX but it has assets up in China. So its unconventional gas projects, strong gas prices up there, $8 to $9, fully funded and Chinese need the gas desperately. So, that stock I really like.
Lelde Smits: Any other stocks we should be paying attention to?
Alexis Clark: Another stock I like is Neon Energy Limited
(ASX:NEN). Neon is a high-risk, high-impact exploration play drilling two big wells off shore Vietnam. They are currently drilling at the moment. They are drilling one well which is a big gas target, with E & I as the operator. And, they’ve got another well coming up in September with E & I as well. So, one not for the faint hearted, but big impact if they come in.
Lelde Smits: What are the main countries or factors fueling energy demand at the moment?
Alexis Clark: Definitely China and India. I have been up to both of those countries in the last six months and the demand for energy and the growing middle class there is significant and they need clean energy sources such as gas. So, that’s fueling the demand there.
Lelde Smits: Fears of a potential US-led military strike against Syria have pushed the oil price higher. Do you anticipate any action will occur and how would this impact the oil price?
Alexis Clark: I think unfortunately it is moving toward the potential for a military action with comments overnight. So, I do think something will happen there with the Syrian regime. So, I think we’ll see a spike in the oil price. It is has already happened partially, we’ll see further upside pressure there. But, it will be short-lived in my view.
Lelde Smits: So Alexis where do you see the oil price trending over the short term and the next year?
Alexis Clark: In the short term I think it will get up to $US125-$130 a barrel but then it will come down to $US110-$100 a barrel because the economy needs a cheap oil price to function.
Lelde Smits: Which Australian producers will benefit the most should the price travel to your prediction?
Alexis Clark: The key beneficiaries of something like that would be the large caps, Woodside Petroleum Limited
(ASX:WPL), Santos Limited
(ASX:STO), Oil Search Limited
(ASX:OSH). They’ve got contracts, they’re linked to the oil price, LNG [Liquefied Natural Gas] contracts linked to the oil price and they always react to a strong oil price.
Lelde Smits: In your years oil and gas analyst I’m sure you’ve seen a number of structural changes. Which emerging trends are currently changing the Australian energy landscape and creating potential growth opportunities?
Alexis Clark: The key emerging trend is the emergence of exporting of shale gas out of the US and East Africa which are going to hit the Australian market and impact on our future LNG projects. So, what you’ll see is LNG projects will be developed through floating LNG technology, which is where Woodside Petroleum Limited
(ASX:WPL) are heading. And, you’ll see a number of other projects on that front. So, that’s going to be a key thing to focus on in the near term.
Lelde Smits: Alexis Clark, thanks for joining us at RIU’s Good Oil Conference and for the outlook on the sector.
Alexis Clark: Thanks for having me.
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