BNY Mellon Investment Manager Sees Opportunities as New Energy Sources Come On Line
NEW YORK and LONDON, February 28, 2013 — The days of worrying about the threat of a devastating oil price hike are over, according to a white paper from The Boston Company Asset Management (TBC), LLC, the Boston-based equity specialist for BNY Mellon.
For decades, pundits have been trying to predict the point at which a sustained climb in oil prices would spark a near-collapse of the global economy. However, TBC's February 2013 paper, End of an Era: The Death of Peak Oil, contends structural shifts in the energy industry have insulated the global economy from dramatic spikes in oil prices, while simultaneously creating an array of investment opportunities.
After years of indifference, U.S. consumers have radically reduced their consumption of petroleum and related products, moderating demand in the world's largest market, according to the report. Concurrently, heightened investments and technological breakthroughs, such as fracking, have spurred an explosion in resources, creating balanced supply and demand, the report said.
Areas of investment opportunity highlighted in the report include exploration companies, energy service companies, pipeline and transportation companies, companies that benefit from the low cost of gas and associated liquids, and companies that sell products to firms that directly are involved in natural gas and oil production.
The changing environment for energy has created potential traps for investors, warns Robin Wehbe, who heads the energy research team at TBC and is a co-author of the report. "Exploration companies have become victims of their own success as natural gas discoveries have led to a glut of new supply and depressed prices," he said. "However, investors who can identify exploration companies operating in the most profitable and prospective shale plays can find opportunities."
Energy services companies drill wells and perform other services for the exploration companies. The report notes that services companies operating technologically advanced horizontal operating drilling rigs are integral to recovering the new sources of oil and gas from shale.
Increasing shale and oil production also is likely to create demand for more pipelines, separation and storage facilities to move crude oil and gas from the wells to refineries and other users. With the relatively strong predictability of future revenues, pipeline companies can then pay higher dividends to shareholders, the report said.
Utilities are expected to benefit from lower fuel costs, and lower natural gas prices are expected to benefit U.S.-based chemical companies, according to the report. These benefits also are expected to extend to refineries and manufacturers, the report said.
The Boston Company Asset Management, LLC, a BNY Mellon Investment Management boutique, provides investment management services for corporate, public, mutual funds and union sponsored and jointly trusteed retirement plans, endowments and foundations.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.4 trillion in assets under management. It encompasses BNY Mellon's affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.
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