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Aberdeen University Trading and Investment Society

Aberdeen University Trading and Investment Society. Energy Sector Overview 30/10/13. Structure. Energy Sector Overview Subsectors Growth Analysis Recommended Stocks (SWOT Analysis) Cairn Energy PLC (CNE) - Andrew Douglas IGAS Energy PLC (IGAS) - Ally Dickson

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Aberdeen University Trading and Investment Society

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  1. Aberdeen University Trading and Investment Society Energy Sector Overview 30/10/13

  2. 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

  3. 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

  4. Growth • Energy is fundamental global growth – • Emerging Markets • Which type of energy?

  5. Analysis • Unique 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

  6. 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

  7. 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

  8. Stock Recommendation (SWOT) Ally Dickson • Stock Recommendation – IGas Energy plc • IGasEnergy 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.

  9. 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.

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