Apply the traditional 6-to-1 price ratio versus natural gas and oil should be trading at $16.50 a barrel, notes Ben Dickey of BSG&L Financial Services, manager of two growth-oriented Covestor investment models.
But fuhgetabout it: That traditional price ratio won’t be seen again any time soon. In fact, gas prices are likely to be capped at $4 to $4.50 per million BTUs over the next 18 months, he says.
The long-term opportunities for gas will take time to develop. The industry needs a better pipeline system more gas-to-liquid facilities and an infrastructure buildout so that gas can be used broadly as a transportation fuel.
In the meantime, the near-term opportunities in the energy sector, he says, are in onshore oil exploration and development, oil services companies and midstream pipelines.
Dickey put together a comprehensive Oil and Gas Outlook for 2012 and 2013 in the latest edition of Oil & Gas Monitor.
You can access his full analysis here.