A Checkup on Energy ETFs
06/03/08 - 07:19 AM EDT
Billy Fisher
"We would argue that energy prices are not that expensive in the U.S. when you compare them to other consumer goods," Halliburton said. "You are seeing consumers start to get nervous because they have become addicted to very low gas prices relative to other consumer goods."
The two names that Halliburton likes best in the exploration and production space are ConocoPhillips(COP Quote - Cramer on COP - Stock Picks) and Marathon Oil(MRO Quote - Cramer on MRO - Stock Picks). Shares of ConocoPhillips are up 20.4% vs. a year ago, as the company has benefited from significantly higher commodity prices including an 18.6% increase in the price of natural gas vs. the company's year-ago quarter. "I think natural gas prices are going to continue to improve," Halliburton said. Shares of Marathon are 30.5% off of their 52-week high achieved last June. Rapidly rising crude prices have had a negative impact on the company's downstream business, which reported a loss of $75 million in its first quarter. "The refining and marketing sector as a whole is taking it on the chin right now as refining margins have been going down," Halliburton said. "In time we would expect the refiners to pass through these increases in costs." He likes Marathon on a valuation basis. "The stock is extremely inexpensive," Halliburton says. "We are expecting Marathon to have strong earnings in 2009 and 2010 as well." Oil Services The equipment and service ETFs have been gaining momentum in recent months and are not that far behind the exploration and production ETFs. The SPDR ETF is up 15.9% this year while its iShares counterpart is up 13.8%. Among the top names in these funds are Schlumberger (SLB Quote - Cramer on SLB - Stock Picks), Transocean (RIG Quote - Cramer on RIG - Stock Picks), National Oilwell Varco (NOV Quote - Cramer on NOV - Stock Picks) and Baker Hughes (BHI Quote - Cramer on BHI - Stock Picks). The one name that stands out the most in this space for Halliburton is Transocean. Last month, the company announced a 41.6% increase in its first-quarter EPS on a 134.2% rise in quarterly revenue. The improvements are largely attributable to the company's merger with GlobalSanteFe, which closed in November. Transocean has also benefited from higher average day rates for its fleet.
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