Intense summer heat and climbing oil prices could boost the shares of small gas and oil companies including Range Resources Corp. (RRC) and Denbury Resources Inc. (DNR), Barron's financial newspaper reported on Sunday.
According to Barron's, Peter Vig, a hedge-fund manager who runs Dallas-based RoundRock Capital, is "unreservedly bullish on oil stocks," because "most of them still don't reflect the sorry probability that higher oil prices are here to stay."
Barron's said Vig likes Plano, Texas,-based Denbury Resources, which it said is unique because Denbury owns the biggest reserves of carbon dioxide used in oil recovery east of the Mississippi River.
In its liquid form carbon dioxide is used to extract oil that can not be recovered by traditional drilling means. Called "tertiary recovery," Barron's said getting oil with carbon dioxide is "low-risk and predictable" because the amount of oil recovered correlates with the amount of carbon dioxide injected.
Denbury's production is projected to grow, on average, 13 percent a year, nearly doubling over the next five years, Barron's said.
HOT OIL, COOLING GAS
In contrast, the outlook for gas shares -- which have risen over the past few days because of high temperatures across much of the United States -- is more cautious, Barron's cited Vig as arguing, because once the heat wave cools off, gas storage will begin to build again as demand for electricity drops.
Last week, a small dip in inventories surprised the market, Barron's said.
But Vig remains bullish on Range Resources, Barron's said, because of its "huge inventory of low-risk prospects, its super-lean finding costs and its briskly rising production."
The company has proved reserves of 1.6 trillion cubic feet with an average life of 15 years, Barron's said, adding that more than 80 percent of the reserves are gas, and only two-thirds is developed.
Denbury, which according to Reuters Data has a price-to-earnings multiple of 21.8, closed on Friday at $32.65, down a penny. Range, which trades at a multiple of 20.6, closed at $26.75, up 1.7 percent.
According to Barron's, Peter Vig, a hedge-fund manager who runs Dallas-based RoundRock Capital, is "unreservedly bullish on oil stocks," because "most of them still don't reflect the sorry probability that higher oil prices are here to stay."
Barron's said Vig likes Plano, Texas,-based Denbury Resources, which it said is unique because Denbury owns the biggest reserves of carbon dioxide used in oil recovery east of the Mississippi River.
In its liquid form carbon dioxide is used to extract oil that can not be recovered by traditional drilling means. Called "tertiary recovery," Barron's said getting oil with carbon dioxide is "low-risk and predictable" because the amount of oil recovered correlates with the amount of carbon dioxide injected.
Denbury's production is projected to grow, on average, 13 percent a year, nearly doubling over the next five years, Barron's said.
HOT OIL, COOLING GAS
In contrast, the outlook for gas shares -- which have risen over the past few days because of high temperatures across much of the United States -- is more cautious, Barron's cited Vig as arguing, because once the heat wave cools off, gas storage will begin to build again as demand for electricity drops.
Last week, a small dip in inventories surprised the market, Barron's said.
But Vig remains bullish on Range Resources, Barron's said, because of its "huge inventory of low-risk prospects, its super-lean finding costs and its briskly rising production."
The company has proved reserves of 1.6 trillion cubic feet with an average life of 15 years, Barron's said, adding that more than 80 percent of the reserves are gas, and only two-thirds is developed.
Denbury, which according to Reuters Data has a price-to-earnings multiple of 21.8, closed on Friday at $32.65, down a penny. Range, which trades at a multiple of 20.6, closed at $26.75, up 1.7 percent.
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