Since oil prices began plunging in early 2014, there has been no shortage of investors eagerly looking for ways to benefit from a potential return to former high prices. Here are 3 possible ways to invest in a return to higher oil (and gas) prices:
Senex Energy Ltd (ASX: SXY)
This small-cap oil and gas company has been sitting on promising land-based gas reserves for years now, without the funding to really exploit them. A recent deal and capital raising with new strategic partner EIG will see Senex well-funded to accelerate the development of its flagship Western Surat basin project. Senex also has a 20-year gas supply arrangement with Santos Ltd (ASX: STO) that will provide guaranteed sales of up to 50 Petajoules (PJ) per day, once production commences.
MMA Offshore Ltd (ASX: MRM)
This is a very high risk company that I have written about before – it is effectively under the control of its bankers after grossly exceeding its debt covenants following a collapse in the oil support vessel market. However, following a $45 million payment in the first half of this year, MMA will not have to make any down-payments on its debt until it comes due in 2019, allowing management time to run the company and wait for a possible turnaround. With half of its fleet laid up in dock due to lack of work, MMA has plenty of excess capacity to benefit from a possible turnaround.
This has a binary outcome – either the turnaround will happen or the company is virtually guaranteed to be wound up, in my opinion. Without any green shoots in the vessel supply market yet I recommend watching MMA Offshore from the sidelines, for now.
Origin Energy Ltd (ASX: ORG)
Origin Energy Ltd is mainly of interest for the upcoming Initial Public Offer (IPO) of its oil and gas assets, which management is spinning off and selling in order to reduce debt. This new company is expected to have many of Origin's assets including the promising Waitsia and BassGas fields, and is thought to have around 948 Petajoules (PJ) of reserves and 75PJ in annual production. Origin is reportedly doing the rounds of potential buyers at the moment and as yet it's unclear how the company will be priced. Even so, this is one IPO that could prove interesting, in my opinion.
