Lacey & Waghorn: UK energy stocks have 95% upside

Investec's Mark Lacey and Jonathan Waghorn have said energy equities in the E&P sector are showing "extreme value" as shares discount M&A prospects and price in a global recession.

The pair, managers of the Investec Global Energy fund, said energy equities are now discounting "recession-based" underlying crude prices of around $60 a barrel, 45% below current oil prices. That represents "the widest discount to spot and forward curve prices we have seen for the last few years", according to Lacey. Forward curves of WTI and Brent crude are pricing in $92 a barrel and $98 a barrel respectively until 2016. Lacey and Waghorn see these valuations against a backdrop of extremely tight supply/demand and the likelihood of companies using strong balance sheets to acquire a...