How the energy sector can still be a wise investment
Floating behemoth is future of production in Scottish waters
OiL is at a crossroads, with the headlines yesterday dolefully recording the lowest North Sea activity in decades. But the black gold retains some of its old lustre, for while the FTSE 100 may be sagging, soaring oil shares have helped cheer investors this year, with crude touching $78 again this week and up 43 per cent over the past 12 months.
The recovery is also welcome news for the £17billion oil and gas sector in Scotland, the largest in the EU, with more than 2,000 firms and 115,000 supply chain jobs.
Energy companies are due to have invested £5billion in the North Sea by the end of this year, and merger deals worth £6billion were completed last year.
Scotland is also a hotspot for renewable energy, which supports almost 60,000 jobs in a £10billion-a-year sector.
So how can investors back the Scottish energy renaissance? Here money mail talks you through ten energy share picks.
BP
BP is investing £420million in two new North Sea fields producing up to 30,000 barrels of oil a day. Alligin, west of Shetland, and Vorlich in the central North Sea are expected to come on stream in 2020.
BP shares hit five-year highs this summer. Cashflow from the oil price eased investor worries over whether it might have to cut the dividend – at this week’s share price, it equates to a juicy payout of 5.8 per cent.
ROYAL DUTCH SHELL
ONE of this year’s flagship developments will be royal dutch Shell’s ‘Penguins’ field north-east of Shetland, its biggest investment in the North Sea for six years.
Shell, too, is still yielding almost 6 per cent. russ mould at AJ Bell says: ‘BP and Shell are the biggest members of the sector index and they will generally respond favourably to the higher oil price as the higher crude goes, the safer their fat dividend yields become.’
WOOD GROUP
FOUNdEd in Aberdeen in 1982 by Sir ian Wood, the UK’s leading oil services group is worth more than £4.6billion and in the FTSE 250.
The North Sea is now just one arm of a global empire employing 64,000 people, strengthened last October by a £2.2billion deal to buy major rival Amec Foster Wheeler. The shares are still some way off the levels that took Wood into the FTSE 100 and yield 3.8 per cent.
PREMIER OIL
PrEmiEr dates back to 1934. more recently it discovered the North Sea’s Catcher field in 2010 and bought E.ON’s UK North Sea gas fields for $120million in 2016.
Another key project, the Tolmount gas field, was given the green light last month. Unlike some midsize players, its shares have doubled in the past 12 months and FTSE 250 Premier’s value is now approaching £1billion.
HURRICANE ENERGY
HUrriCANE only came to the Alternative investment market in 2014, and has yet to produce any oil. But it’s already valued at more than £1billion, thanks to its stake in the huge Lancaster oil project, west of Shetland. Broker Cantor has set a price ‘target’ of 80p a share, 50 per cent above current levels. ‘The riskiest oil plays are the Aim-quoted junior explorers, which may not even be producing or have a find, but whose share prices could welcome more positive sentiment toward their industry,’ says russ mould.
SSE
BASEd in Perth, the £13billion SSE is the third largest of the ‘big six’ by customer numbers, but its planned merger with Germany’s npower will create a colossus to challenge market leader British Gas.
The UK’s leading generator of electricity from renewable resources, it runs Scotland’s hydro-electric schemes and is a big investor in wind farms. its shares were hit by worries about energy price caps and now yield a tempting 7.5 per cent.
GREENCOAT UK WIND
THiS is a £1.4billion investment trust which invests solely in UK wind farms. it was the first renewable infrastructure fund to list on the London Stock Exchange and is in the FTSE 250 index.
Eight of its windfarms are in
Scotland, from the Borders to Caithness. The shares are up around 20 per cent since launch five years ago and they yield over 5 per cent.
FAROE PETROLEUM / PARKMEAD
WORTH around £560million, Faroe is Scotland’s biggest AIM explorer, with plenty of rig activity and uK interests including the Schooner and Ketch gas fields and the Blane oilfield.
Faroe shares hit a five-year high this year and last month it saw off a boardroom power grab from Norwegian investors.
The smaller Parkmead, another Scottish company, was awarded nine new blocks in the last North Sea licensing round and has a small portfolio of gas assets, no debt and plenty of cash.
ENQUEST
ONE of the bigger junior explorers on AIM, worth around £400million. Enquest claimed a ‘transformational’ 2017, when it snapped up the Magnus oilfield and the Sullom Voe terminal in Shetland.
It is ramping up production this year and cutting capital spending. But it’s not for the faint-hearted: shares were volatile this year and are still at around a quarter of their peak 2014 value.
SERICA / IGAS
LONDON-BASED Serica opened a base in Aberdeen last month following a deal with BP last November to take over three fields with 100 workers. The group is worth around £200million.
Worth only £125million, IGas may seem like a minnow but it is the largest independent producer of oil and gas onshore in Britain. Its Scottish connection is licences at Lybster in Caithness and Midland Valley in central Scotland.