The Investment Case for Oil & Gas
Considerable underinvestment in oil and gas.
At the 2021, +1400 institutions with ~$32 trillion under management committed to divesting of some or all their fossil fuel investments.
More investment is needed in the upstream oil and gas sector not only to sustain production as global demand grows, but to drive the transition to cleaner energies.
Countries need to be energy independent and secure in light of geopolitical events.
Shift towards profits rather than production growth where profits are defined as dividends and share buy backs.
Warren Buffet, biggest investment last year was $10 billion in Occidental.
Joseph McMonigle, secretary-general for the International Energy Forum
CEO John Hess
"Capex cuts by international oil companies and national oil companies in 2020 was about 35%. We're now showing another 23% reduction in capex levels" from pre-pandemic levels this year.
In 2019, E&P companies spent $525 billion, an amount which plummeted to $341 billion in 2021.
"We have to get back to $525 billion over several years until 2030 to restore market balance," McMonigle said. "I'm afraid what we're seeing with the energy crisis is on our doorstep.”
Investment in energy supply represents the "greatest challenge the oil and gas industry faces today. We're way short of where we need to be."
Asset Performance through U.S. rate hike cycles
Commodities are considered a hedge against inflation due to their intrinsic value and tend to perform well when prices for consumer goods are on the rise.
Commodities consistently outperform other asset classes for an extended period of time after U.S. rate hike cycles.
Rhinoenergy has a strong pipeline of oil and gas investment opportunities to deliver sustainable long term performance through economic cycles.
Average annualized local currency returns of risk assets during hiking cycles
Source: Bloomberg. J.P. Morgan Asset Management. Represented indices are: Commodities (S&P Goldman Sachs Commodity Index), Asia ex-Japan equites (MSCI AC Asia ex Japan Index). EM equities (MSCI Emerging Markets Index). U.S value over growth (calculated as the average annualized daily excess return of MISCI USA Value minus MSCI USA Growth indices during each rate hike cycle), Japanese equities (TOPIX Index), European equities (MSCI Europe Index), U.S. investment grade (Bloomberg U.S. investment grade index), U.S. equities (S&P 500 Index), U.S. dollar (U.S. Dollar Index), U.S. cyclical over defensives (calculated as the average annualized daily excess return of the Goldman Sachs U.S Cyclicals Index minus Goldman Sachs U.S. Defensives Index during each rate hiking cycle, U.S high yield (Bloomberg U.S High Yield Index). “Since 1999” and “3 months after first hike” cover the 4 rate hike cycles of the US from 1999 to 2022 while “12 months after first hike” covers the 3 rate hikes cycles of the US from 1999 to 2019 except for EM equities and Asia ex-Japan equities where “Since 1999” and “3 months after first hike” covers 3 hikes between 1999 to 2022 due to data. Past performance is not a reliable indicator of current and future results.
Guide to the Markets – Asia. Data reflect most recently available as of 30/06/22.
Source: JP Morgan Asset Management
Asset Selection Tool
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