uploads///Crude Oil

Leon Cooperman’s ‘Solution’ for Low Oil Prices


Sep. 14 2017, Published 12:33 p.m. ET

Cooperman on oil prices

Billionaire investor Leon Cooperman shared his view on crude oil (USO) (UCO) prices at the 2017 Delivering Alpha Conference on Tuesday, September 12, 2017, stating: “the solution for low oil prices is low oil prices.”

According to Cooperman, crude oil supply-demand dynamics play an important role for energy companies. During high oil prices (OIIL), competition increases among producers, which could increase crude oil supplies. But rising competition could impact oil prices negatively.

The opposite thing happens during low oil prices. Competition dries out because some oil producers stop producing oil when it turns unprofitable.

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WPX Energy and Hess

Cooperman’s top two choices among upstream companies are WPX Energy (WPX) and Hess (HES). These two upstream companies could see a large surge in their production levels over the next year.

Specifically, Cooperman said, “Energy stocks seem overly discounted. These two picks have growing production profile and a net asset value well above current prices at existing oil prices.”

Cooperman added: “I predict oil will be higher in a year. I see the price of oil going to $60.”

According to Cooperman, Hess’s (HES) production could rise 10% in 2018. If oil prices are at $55 per barrel and natural gas at $3 per MMBtu (million British thermal units), the NAV (net asset value) per share of HES could be more than $60. WPX Energy’s (WPX) production could rise 37% in 2018.

Energy commodities over the past year

In the past year, WTI (West Texas Intermediate) crude oil active futures have risen 4.2%, while natural gas active futures have risen 3% in the past year. However, the Energy Select Sector SPDR Fund (XLE), which tracks the performance of the energy sector, fell nearly 7.1% during this time period.

In the next part of this series, we’ll analyze Cooperman’s view of First Data Corporation (FDC).


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