3 Oil and Gas Shares Rising Fast


LONDON -- Oil prices have made modest gains this week -- Brent crude for February delivery was up 1.2% to $109.50 per barrel on Friday, while WTI crude was up 1.8% to $89.00, shortly before U.S. markets opened on Friday. U.S. natural gas prices have rebounded after last week's falls, and gas for January delivery was up by 6.1% on the week at $3.49/mmbtu shortly before U.S. markets opened on Friday.

Many investors prefer to invest in commodity ETFs rather than directly in futures, and holders of the United States Oil Fund have seen their shares rise by 2.9% so far this week, leaving them trading at $32.73 shortly before U.S. markets opened on Friday. The United States Natural Gas Fund has performed better so far this week, and was up by 3.9% at $19.60.

The nature of oil and gas companies' businesses means that they can succeed or fail regardless of oil prices. This week's risers have all outperformed the price of oil by a big margin in recent months.

Fortune Oil soared 17% to 10.7 pence this week after it announced the $400 million sale of its Chinese natural gas business to China Gas Holdings. The business units being sold generated profit before tax of £18 million on revenues of £59 million in 2011. The deal gives Fortune Oil $200 million in cash on completion with a further $200 million as deferred consideration, with the option of replacing this amount with the equivalent number of China Gas shares. Fortune intends to become a major investor in China Gas and the terms of the agreement allow Fortune Oil to nominate two directors to the board of China Gas.

President Energy has gained 8% to 27 pence so far this week, capping a 33% gain over the last three months. The company's main focus is its exploration blocks in Paraguay, which it estimates could transform the country from an oil importer to a net exporter. This week President released a Competent Persons Report for its Pirity and Demattei concessions in Paraguay, confirming its estimated mean gross prospective recoverable resource of 159 million barrels.

SM Energy is up 13.5% to $53.80 so far this week, following publication of its 2013 guidance. The U.S.-focused company plans to invest $1.5 billion in its U.S. shale assets and expects production output to have reached between 769 million cubic feet equivalent per day and 808 million cubic feet equivalent per day by the end of 2013, with total annual production of between 255 billion cubic feet equivalent and 267 billion cubic feet equivalent. The prospect of continued low gas prices means SM is increasing its emphasis on oil production and expects that production will be split 50:50 between natural gas and liquids by the end of 2013.

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