|
Income trusts to revel in higher oil prices
In again raising the bar for crude prices over the next three years, investment dealer FirstEnergy Capital says income trusts should enjoy the spoils.
The Calgary-based firm predicts the 28 trusts its tracks should see surplus cash flow of about C$1.4 billion this year, with much of the proceeds channeled into capital spending to ensure internal growth at a time when acquisition prospects are fewer and costlier in Western Canada.
Distributions to unit holders should also rise, the Calgary-based firm said.
On the downside, FirstEnergy warned that the hot pace of upstream activity will likely be reflected in higher service costs.
FirstEnergy now expects an average West Texas Intermediate price of $55 per barrel this year, $60 in 2006 and $61 in 2007, with demand becoming the “pure determinant” of price at the margin this year and next. Spare capacity ‘near zero’ It said effective, spare wellhead oil and natural gas liquids capacity around the world will be “near zero,” meaning supply can no longer pull prices down.
But it was less enthusiastic about heavy oil prices, predicting that the differential with light crude will widen by several more dollars.
It attributed that outlook to North America’s downstream inability to handle growing volumes, combined with the fact that the average global barrel is heavier and more sour, forcing heavy prices even lower.
FirstEnergy has forecast natural gas prices of $7.25 per million British thermal units this year, $7.75 in 2006 and $8 in 2007, all up 25 cents from its previous forecast. Over the near term it expects greater demand for gas, largely to meet the need for gas-fired power generation, because coal and nuclear plants are operating at capacity, with gas-fired plants demanding an extra 1 billion cubic feet per day between 2005 and 2007.
—Gary Park
| 