Why has the Cairn Energy PLC share price risen 5% today?

Why is Cairn Energy PLC (LON:CNE) (CNE.L) up sharply today?

Cairn Energy PLC
Cairn Energy PLC

The Cairn Energy PLC (LON:CNE) (CNE.L) share price has made a gain of around 5% today. It follows positive research coverage and comes ahead of the company’s full year results for the 2017 financial year, which are due out tomorrow.

In my view, the company could have a bright future. Although more information will be provided on its performance in tomorrow’s results, I feel that its long term prospects remain relatively bright.

One reason for this is the rising oil price. While still volatile, it has risen significantly in recent months, and this seems to have lifted investor sentiment towards the oil and gas sector.

This trend could continue over the medium term, since demand growth is forecast to be higher than supply growth during the course of 2018. This could lead to upward pressure on the oil price over the medium term, which may be good news for oil and gas companies such as Cairn Energy.

A rising oil price obviously makes projects more economically viable. This could be good news for the stock because it has a major pipeline of new projects which could come onstream over the next few years. Therefore, I wouldn’t be surprised if its performance from a financial perspective improves, while forecasts may be updated to reflect this.

Obviously, the oil price could move lower. I expect it to remain volatile in the near term, and this could cause some uncertainty among investors. But with the potential for a firmer price in the long run, I’m optimistic about the prospects for the oil and gas industry.

Therefore, I remain upbeat about the investment potential of Cairn Energy. I feel that its share price could be volatile, but may offer upside potential in the long run. It seems to have a solid strategy and growth potential for the future.

About Robert Stephens 2805 Articles
Robert Stephens is a CFA Charterholder and an Equity Analyst by trade. He is a passionate private investor who has been buying and selling shares for many years, owning a wide range of UK shares in the process. He has written for Citywire and The Motley Fool US and now runs his own business. To contact Robert, please email info@investomania.co.uk or use one of the other contact methods available on the 'Contact Us' page