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Legendary investor likes oil, not gas

Boone Pickens expects high oil prices, low natural gas prices and a pick-up in energy sector leveraged buyouts, the legendary oil investor said Friday.
/ Source: Reuters

Boone Pickens expects high oil prices, low natural gas prices and a pick-up in energy sector leveraged buyouts, the legendary oil investor said Friday.

Pickens, who came to Calgary to mark a $2 million donation to a brain-research institute, said at a press conference he remains bullish on oil. Prices, he said, will need to be robust to as demand in the U.S. and Asia grows while producers struggle to boost supplies.

"You got 85 million barrels (a day) available globally and I don't think that 85 million is going to grow. I think that's all the world can do," he said. "And if that's the case, with demand going up, the price has to come up to a level that will kill demand."

Pickens, a long-time backer of companies operating in Canada's oil sands, said he's been buying shares of oil-sands miner Suncor Energy Inc. as that company's stock price slipped in recent weeks along with those other energy companies.

"I've been a buyer of Suncor recently on the pullback from $85" a share, he said.

However Pickens, said to have made $1.5 billion last year from bets on rising oil prices, isn't as optimistic about natural gas.

The price of gas has retreated from a high of $15.38 per million British thermal units in December to a recent $6.17 per mmBtu after an unusually mild winter cut demand for the fuel.

"Natural gas has struggled for a while and it could stay down in the $5, $6 area," he said.

"Given a slow hurricane season and a warm winter and you've got $5 gas this time next year."

Pickens, who became famous as a corporate raider in the 1980s, also expects a return to leveraged buyouts among oil and gas companies, along the lines of pipeline firm Kinder Morgan Inc.'s $13.4 billion management-led offer for the company.

Pickens said energy companies are fighting declining oil and gas reserves and production, but still need to boost share prices, leading to acquisitions of rivals and buyouts.

"Do I see more of those LBOs? I do," he said.

"Declining reserve bases will promote more LBOs."