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How should you be trading crude oil and the refiners? Find out from one of the biggest energy investment bankers in the business.
Matthew Simmons, Chairman of Simmons & Company International, joins the panel for this conversation. Since 1974, Simmons has closed over $100 billion in energy-related mergers and acquisitions. Following is a summary of his main points.
What do you expect to hear from big oil as they report earnings?
I suspect that Exxon Mobil [XOM
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] and Chevron [CVX
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] will have first rate profits because gas prices have been high. They could be hurt somewhat by the refining margins, but an oil company can’t help but make money right now, replies Simmons.
However, it’s worth noting that the amount of growth the top 5 oil companies have been able to generate has been almost negative while their spending has been higher than it’s ever been. I think the trend will accelerate.
Is any piece of the energy industry poised for prosperity?
I think the equipment group could be in for an enormous amount of growth, because assets are old and rusty, replies Simmons. I think they need to rebuild the whole industry or we will have the indignity of oil supplies going down because we just let the system rust. I think we’re at a real turning point.
Are there specific companies that are well positioned to benefit?
I don’t know the engineering companies that well, but the ones that have the best access to good people should do well. Investors will have to pick and choose.
What’s the trade?
I like Jacobs Engineering [JEC
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] says Guy Adami, as well as Flowserve [FLS
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Read More
> Find out what Jon Najarian anticipates hearing from Exxon Mobil and Chevron when they report earnings.
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Trader disclosure: On Jan 31, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (EMC), (INTC), (ATVI); Najarian Owns (BR), (C), (CSCO), (EMC), (MS), (MSFT), (YRCW); Najarian Owns (EBAY) Calls, (CMC) Calls, (GOOG) Calls, (YHOO) Calls; Finerman Owns (GS); Finerman's Firm Owns (PZN), (TSO), (VLO), (YHOO), (BR); Finerman's Firm And Finerman Own (CROX); Finerman's Firm Is Short (SPY), (IYR), (IJR), (MDY), (CME), (WFC), (COF); Finerman's Firm And Finerman Own (HD); Finerman's Firm Is Short (LEH) And Owns (LEH) Puts
Data is a real-time snapshot *Data is delayed at least 15 minutes