Calgary, Alberta (February 2, 2022) — Enverus Intelligence Research, a part of Enverus, the leading global energy data analytics and SaaS technology company, has released a report analyzing key trends that it believes will shape energy markets in 2022.
“2022 is shaping up to be a strong year for the energy sector. Oil and gas businesses are more profitable and attractive to inflation-concerned investors today than in the last decade. Despite the industry’s focus on profitability, we still see significant production growth out of North America driven by the Permian, Haynesville and Montney plays,” said Dane Gregoris, managing director of Enverus Intelligence Research and author of the report. “Valuations have reset across the new energy sub-sectors, particularly in EV charging and energy storage. We believe this presents numerous investment opportunities.”
Key takeaways from the report:
- We believe the oil E&P beta trade is largely over, but a rotation of yield-focused investors into large, high-quality E&Ps with strong distribution programs could drive incremental multiple expansion. There is more rationale for natural gas-exposed E&Ps to re-rate on a long-term basis given low implied gas prices ($2.75 HH) compared to our mid-decade outlook ($3.50+ HH). However, spot prices for natural gas in North America likely will trade lower over next couple of years ($3-$3.25 HH).
- We see potential for weakness in oil markets during 1H22 relative to the current strip. Unexpected outages in Libya and disappointing OPEC+ production growth are not enough to offset the combination of omicron, seasonal-driven demand weakness and growing U.S. supply (1 MMbbl/d this year), in our opinion. Nevertheless, low crude and product inventories and high geopolitical tensions will drive extreme price volatility until stocks return to normal. In 2H22, demand risks tilt decidedly bullish. Supply chain issues fade and vaccinations accelerate, offering strong support for the Brent prices to range $75-$80/bbl.
- Although we see downside to NYMEX strip prices over 2022-23, longer term we believe embedded price expectations for Henry Hub in gas-focused E&P equities and assets will ultimately rise beyond $3.50/MMBtu. Gas equities present opportunity for long-term investors as high European and Asian prices continue to incentivize LNG final investment decisions. Higher mid-decade demand expectations should help multiples expand for natural gas-weighted E&P businesses with the capacity for sustainable long-term distributions, both in terms of inventory and takeaway capacity.
Members of the media should contact Jon Haubert to schedule an interview with one of Enverus Intelligence Research’s expert analysts.
Enverus is the leading energy SaaS company delivering highly-technical insights and predictive/prescriptive analytics that empower customers to make decisions that increase profit. Enverus’ innovative technologies drive production and investment strategies, enable best practices for energy and commodity trading and risk management, and reduce costs through automated processes across critical business functions. Enverus is a strategic partner to more than 6,000 customers in 50 countries. Learn more at Enverus.com.
About Enverus Intelligence Research
Enverus Intelligence Research, Inc. is a subsidiary of Enverus and publishes energy-sector research that focuses on the oil and natural gas industries and broader energy topics including publicly traded and privately held oil, gas, midstream and other energy industry companies, basin studies (including characteristics, activity, infrastructure, etc.), commodity pricing forecasts, global macroeconomics and geopolitical matters. Enverus Intelligence Research, Inc. is registered with the U.S. Securities and Exchange Commission as an investment adviser.