Investment opportunities in energy exploration companies

Investors wanting exposure to the energy sector should look to the energy exploration and production companies for investment opportunities, rather than just investing in large oil companies such as BP or Shell, according to David Whittall, portfolio manager for Bennelong SGI.

Speaking at a presentation on the global energy sector, Whittall said investors should reconsider heavy investment in the large integrated oil companies such as BP or Shell.

The oil companies are grappling with the challenges of falling oil production levels, a weak economy, as well as growing competition from companies in North Africa, Asia and the Middle East, which are developing their own oil refining capabilities.

As a result, Western oil companies are closing down their refining capabilities, and investors should take that into account when they consider investing in that area of the energy sector, Whittall said.

Investors should look past them to other areas in the energy sector for investment, he said.

The energy exploration companies provided many “interesting opportunities” for investing, he said.

Investors should also think of energy exploration companies in terms of their value as potential acquisitions for the integrated oil companies, Whittall said.

Even the integrated oil companies were beginning to realise the value of energy exploration, ploughing two-thirds of their capital into the exploration field, he added.