It has been a tough road for the energy markets over the past several years, as over-production increased oil inventories to record highs. However, the stars are beginning to align for an oil resurgence. Through the end of January 2018, WTI Crude Oil is the second best performing commodity of the year thus far, with year-to-date returns of around 7%.
Natural Resource Investment Firm: Oil To Hit $100 In 2018
According to one prominent natural resource investment management firm, the oil rally is just getting started. Goehring & Rozencwajg, which manages the Goehring & Rozencwajg Resources Fund (MUTF: GRHAX), recently released fourth quarter 2017 market commentary on the state of the oil and energy markets.
In their report titled “Triple Digit Oil Prices: Are You Ready?”, the investment firm was very bullish on their outlook of the oil markets, which estimates the price of WTI Crude will hit $100 sometime in 2018. Goehring & Rozencwajg see the oil rally extending into the triple digits due to continuing inventory drawdowns, improving demand, decrease in large discoveries and early signs of exhaustion in the U.S. shale market.
“Since we first outlined our thesis one year ago, oil inventories have drawn by as much as 650,000 b/d relative to normal – a record rate. The market deficit continues to get worse, and 2018 should see inventories draw further. With the market in deficit, demand surging higher and the rest of the non-OPEC world feeling the impact of meager conventional discoveries, the burden of balancing the market falls to the US shales. However, signs are emerging that the US shales are exhibiting the first signs of field exhaustion and will not be able to make up the shortfall. Inventories should continue to fall, putting upward pressure on oil prices. Our thesis – $100 oil sometime in 2018 – is looking more and more possible,” detailed the firm’s resource report.
To View Full Report, “Triple Digit Oil Prices: Are You Ready?”: Click Here
Goehring & Rozencwajg See Oil Plays As “Phenomenal Buying Opportunity,” As Investors Continue To Overlook Improving Fundamentals
The report notes that despite the fact that oil fundamentals have shifted and slowly stabilized since bottoming in February 2016, the investment community continues to overlook the progress. After several years of extreme bearishness, investors seem to just expect the negative trends to continue. However, this expectation is based on irrational consensus data rather than actual facts.
“We believe energy-related securities today represent great value. Fundamentals have shifted significantly in underlying markets and investors have yet to taken action. Even though crude prices have advanced by nearly 150% since hitting their cycle bottom February 2016, the energy weighting of the S&P 500 has actually declined from ~6.5% two-years ago to 6.1%, and today its weighting remains some 40% below the long-term average level since 2000,” details the oil research report.
“This pessimism, combined with strong underlying tightening trends that are becoming harder and harder to reverse, present investors with a phenomenal buying opportunity.”
Low-Cost Texas Oil Producer To Consider As The Oil Markets Rebound
As black gold’s outlook continues to look bright, Advantagewon Oil Corporation (OTCQB: ANTGF) (CSE: AOC) is one stock to consider. Advantagewon Oil Corp. (OTCQB: ANTGF) (CSE: AOC) is a low-cost and low-risk oil producer that has operations across the state of Texas. As of February 2018, the company has around 24 low-cost oil prospects across two properties within the state.
Current Oil Properties:
- 3,500+ Acres (Guadalupe County)
- Production Cost: ~$11 Per Barrel
- February 2017 Independent NI 51-101 Report: Undiscounted NPV of $96.70 Million (Based on 1,200 Acres Held At Time)
- Saratoga:
- 400 Acres (Hardin County)
- Production Cost: ~$12 Per barrel
- July 2015 Independent NI 51-101 Report: Undiscounted NPV of $36 Million
Recently, Advantagewon Oil Corp. (OTCQB: ANTGF) (CSE: AOC) released its proposed first quarter 2018 drilling program. The company plans to drill up to ten wells on three of its current LaVernia leases before the end of March 2018. Management estimates this will provide an additional 15 barrels of oil per day (BOPD) in initial production. As mid-January 2018, Advantagewon Oil Corp. (OTCQB: ANTGF) (CSE: AOC) announced their total daily oil production is approximately 45 BOPD and they estimate revenues (net of royalties) of around $60,000 USD for the month.
Overall, Advantagewon Oil Corp. (OTCQB: ANTGF) (CSE: AOC) stands to continue sees improving margins and revenue growth, as the oil market fundamentals continue to stabilize. Low-cost and low-risk oil producers are able to continue operating in good and bad conditions, without the higher risk that is associated with deeper drilling operations. Low-risk oil operations have shallow oil deposits that are easily accessible without excessive costs and it helps create stable cash flow. As oil continues to rally, Advantagewon Oil Corp. (OTCQB: ANTGF) (CSE: AOC) will be a major beneficiary.
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