NEW YORK, NY -- (Marketwire) -- 11/22/11 -- Oil and gas explorers have turned to more profitable business segments in recent quarters. With natural gas prices stagnating this year, explorers have focused on the more lucrative oil and liquids markets to keep profits strong. Natural gas prices could be due for a turnaround in the near future, however, as demand is expected to surge. The Paragon Report examines investing opportunities in the Oil & Gas Sector and provides equity research on ATP Oil & Gas Corporation (NASDAQ: ATPG) and Ivanhoe Energy, Inc. (NASDAQ: IVAN) (TSX: IE). Access to the full company reports can be found at:
The US Energy Information Administration (EIA) has observed markedly higher levels of volatility in the pricing of WTI crude since early August. This coincides with similar volatility in global stock markets in the wake of the US and European debt crises, and highlights the extent of the correlation that has developed between financial and oil markets. The price of oil ended last week lower than it began, despite a surge of trading that temporarily pushed crude above $100 at midweek for the first time since July.
Gas prices, meanwhile, have remained low for most of 2011. As a result, several high profile oil and gas explorers are increasing production of more lucrative oil and liquids as oil trades at its highest level relative to gas. US oil production will reach 5.92 million barrels a day in 2012, up 4 percent from 2011 and the highest amount since 1998, according to the US Energy Department. Meanwhile Gas output is forecast to grow a mere two percent to 66.87 billion cubic feet a day in 2012, slower than the 6.1 percent increase this year.
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While in the doldrums at the moment, gas demand is expected to surge higher in the long term. The retirement of coal-fired plants due to toughening environmental standards in the US would increase the share of total electric power generation fueled by natural gas by 6 percentage points, according to Fitch Ratings.
Shares of ATP Oil and Gas have been on a rapid decline this month after it reported third quarter earnings below expectations and disclosed a working capital deficit of $260 million as of September 30. ATP's $1.79 billion in net debt exceeds that of 97 percent of its U.S.-based peers, according to data compiled by Bloomberg. With the company's focus on the Gulf of Mexico, ATP was hit hard by the drilling slow-down that followed BP PLC's 2010 oil spill.
Ivanhoe Energy is an independent international heavy oil development and production company focused on pursuing long-term growth in its reserves and production using advanced technologies, including its proprietary heavy oil upgrading process. Oil revenues were $10.8 million in the third quarter of 2011 compared to $9.4 million in the second quarter.
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