15 de agosto de 2014 / 14:28 / hace 3 años

INVESTMENT FOCUS-Brazil seen juicing oil shares in riskier world

5 MIN. DE LECTURA

* Selected energy firms set to rally over next two years

* Total, Galp, Repsol shares to get most production boost

By Tricia Wright

LONDON, Aug 15 (Reuters) - The promise of production growth in offshore Brazilian and West African oilfields is luring investors to a select batch of European energy firms as geopolitical uncertainty elsewhere weighs on the broader sector.

Portugal's Galp and Spain's Repsol, more exposed than most to lucrative exploration zones deep under Brazil's seabed, as well as France's Total on Angola exposure, are seen as the pick of the bunch as BP and Royal Dutch Shell suffer from weak exploration results.

At a time of increased tension and conflict in Russia and the Middle East, there are few clear signals elsewhere in the energy sector: oil prices have fallen back to around $95-$100 per barrel but are still historically high, while the energy sector's dividend yield has helped it outperform this year.

Brazil is reckoned by analysts to be the biggest area of production growth over the next few years outside of the United States, just as Angola is seen offering the best opportunity in Africa.

Some of this is already reflected in company valuations, especially for Galp, which is trading at a forward price-to-earnings ratio of 30.75 versus a median of 12.47 for a basket of eight oil companies.

But there is a lot of promise: Galp's earnings per share in the current quarter are forecast to jump 35.7 percent year-on-year, according to top-rated analysts' expectations compiled by Thomson Reuters, compared with the median forecast for a contraction of 7.9 percent. A quick rise in earnings is seen bringing a drop in the ratio.

And as more new production comes on-stream, investors believe energy firms offering growth will get more of a lift than those seeing negative trends - especially after an already solid 3 percent year-to-date rise for the European oil-and-gas sector on the back of a reliable dividend cushion.

"What we have seen in the share price is mainly the impact of a better cash-flow trend ... We haven't really seen the impact of better production trends (yet) because (they haven't) really materialised," said Fabrice Theveneau, head of equity research at Societe Generale Corporate & Investment Banking.

"It's going to be a story for this year and next."

Brazil Uplift

Part of what makes production growth appealing to investors is that oil companies are also becoming more careful with their cash; after years of throwing huge sums at projects that repeatedly fail to bear fruit, majors are narrowing their focus.

Total, for example, has outperformed the sector in spite of concerns over its unsuccessful drilling strategy after selling assets and reining back spending. The company has pledged a shift in strategy if its results are weak.

Repsol's sale of $4.3 billion in liquefied natural gas assets to Royal Dutch Shell, meanwhile, slashed the Spanish company's debt by around a third.

"The combination of more mature fields, bigger fields, longer-life fields and the capex discipline has all come together," Andrea Williams, fund manager at Royal London Asset Management, said.

"As these production volumes come through - particularly in offshore Brazil for Galp and Repsol - then I think the sector can continue to re-rate."

Like BP, Total has been hurt by its exposure to Russia, and disruption in Libya could continue to dog Repsol. The liabilities posed by the quest for oil do not stop here either.

There is always the danger of drilling a dry well, underscored by Galp's recent experience offshore Morocco.

And then companies run the risk of their assets being seized - as seen in the 2012 expropriation of Repsol's majority stake in Buenos Aires-based energy firm YPF by Argentina on the basis that the Spanish company had not invested enough.

But overall, analysts at Santander reckon Galp, driven by its Brazil exposure, is looking at a compound annual growth rate (CAGR) of production at 53 percent over the next five years.

For Britain's BG Group they forecast a 14 percent CAGR uplift in the same period - primarily on Brazil, but also Australia and the United States - and for Repsol, a 12 percent CAGR gain on Brazil, the United States, North Africa - assuming Libya is normal from next year - Peru, Trinidad and Russia.

For Total, Santander sees an 8.6 percent increase over the period on Angola, Australia, Nigeria, North America, Iraq, Kazakhstan, Russia and Venezuela.

"It just so happens that you've got in two or three different very big regions ... coincidentally at the same time some very big shifts from high potential to actual delivery," Duncan Goodwin, head of global resources at Baring, said.

"I think there's opportunity here." (Additional reporting by Ron Bousso; Editing by Lionel Laurent and Dale Hudson)

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