S U JA N S H R E S T H A

SECTOR ANALYSIS: ENERGY SECTOR

WHAT IS ENERGY SECTOR?

• According to Investopedia, Energy sector includes

“category of stocks that relate to producing or

supplying energy. This sector includes companies

involved in the exploration and development of

oil or gas reserves, oil and gas drilling, or

integrated power firms.”

ENERGY SECTOR AT BRIEF

• Performance in the sector is largely affect by the supply and

demand for energy.

• Sector performs well during times of high oil and gas prices.

• Sector will earn less when the value of energy drops.

• This sector is fairly volatile and is sensitive to externalities.

• Oil hovering around $100 a barrel and improved economic

conditions in the U.S., energy stocks appear to be a

tremendous bargain.

SECTOR FACT

• Total market cap: 420,556.84 million

• Weight of top 10 constituents: 68.4 %

• Average P/E: 14.34

• Average EPS: $4.04

• Dividend Yield: 2.41%

Source: McGraw Hill Financial

ENERGY SECTOR VS. S&P 500

One Year Graph:

Ten Years Graph: Source: McGraw Hill Financial

Source: Fidelity Investments

ENERGY SECTOR PERFORMANCE

(Source: MSCI USA IMI Energy)

ENERGY SECTOR IN NEWS

• OPEC raises oil demand forecast to 91.1 million

barrels/day – an increase of 1.14 million barrels/day

• Growing emerging economies demanding more energy

• Natural gas production has cut power prices and appears

to be contributing to the "reshoring" of manufacturing

jobs from overseas

• Ukraine crisis to affect Russian and European Union

energy demand/supply

ENERGY SUBSECTORS

(Source: MSCI USA IMI Energy)

SPENDING IN THE FUTURE

Source: KPMG 2013 Energy Outlook

OIL & GAS EXPLORATION AND PRODUCTION

• Focus on finding, augmenting, producing and

merchandising different types of oil and gas.

• Energy fields such as shale, hydraulic fracking,

and other alternative source of energies are

researched.

• High demand for more unexplored locations and

search for inexpensive operating venues

SWOT ANALYSIS

Strengths:• Developing economy’s high

demand for energy.• Market performer over the past

years.• Diverse and international

marketplace.

Weaknesses:• Volatile market industry.• High expense and investment

on every aspect of industry. • Government and international

organization (OPEC) regulated industry.

Opportunities:• Demand for energy will

continue to rise.• Continued investment from

private and governmental agencies.

Threats:• Continued government and

international organization interference.

• Highly concentrated market industry.

• Liable to external factors.

STOCK PITCH

EOG Resources Inc. (NYSE : EOG)

I propose the class to buy 50 shares of EOG Resources Inc. at a current price of $98.98,

expending a total of $4949.00

EOG RESOURCES INC.

• Current price: $ 98.98• Market Cap: 50.79 Billion• Beta: 1.3• EPS: 4.11• P/E ratio: 23.12• 52 week average: 56.03-100.36• Fortune 500 company situated in Houston, Texas.

EOG excels in oil and natural gas exploration and production in the United States with proven reserves in the US, Canada, Trinidad and Tobago, the UK, and China.

EOG VS. S&P 500

EOG IN NEWS

• EOG’s Q4 earning on February 24th, 2014 posted a net

income earning of $548 million from $437 million the

year-ago quarter.

• EOG announced that the company oil production to grow

by 27 percent in 2014.

• EOG’s 2-for-1 stock split on March 17th, 2014

• EOG’s Eagle Ford Shale reported a 45% surge in energy

production capacity from 2.2 billion barrels to 3.2 billion

barrels during 2013

ANALYST ON EOG

• 19 out of 27 analysts (JP Morgan, Goldman Sachs, Morgan

Stanley, UBS, etc.) put EOG as a ‘Strong Buy’.

• According to the Motley Fool, “by 2018, EOG Resources

could be the top oil producer in America.”

• Jefferies Group propose a $210/share target in 2014 from

previous $195/share

QUESTIONS?

REFERENCE

• https://www.kpmg.com/US/en/IssuesAndInsights/ArticlesPublications/Documents/energy-industry-2013-outlook-survey.pdf

• http://www.msci.com/resources/factsheets/index_fact_sheet/msci-usa-imi-energy-gross.pdf

• http://us.spindices.com/indices/equity/sp-500-energy-sector• http://

online.wsj.com/news/articles/SB10001424052702304914904579434750618125242

• http://www.reuters.com/article/2014/03/07/ceraweek-bernanke-idUSL1N0M41LW20140307

• http://www3.valueline.com/secure/vlispdf/stk1700/vlispdf/f3101.pdf• http://

www.fool.com/investing/general/2013/12/29/the-best-energy-stocks-for-2014.aspx

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