Oil prices could approach $100 per barrel in the coming years as firms struggle to maintain current production levels, a top hedge fund manager argued on Monday.
ValueAct Capital Management’s founder and CEO Jeffrey Ubben said, as many companies cut labor forces, keeping up drilling activity will become “very difficult.” The slowdown in production could drive crude to $100 by 2019, he said. On Monday, crude settled under $40 per barrel.
“People say it’s maybe going to go to ($55 per barrel) and hang out there. No way,” Ubben told CNBC’s “Closing Bell.” He also backed embattled drug company Valeant, as it seeks to navigate federal investigations, restive shareholders and a stock price that’s wilting under all the pressure.
Crude’s brutal slump has heaped pressure on U.S. oil and gas producers. Beset by credit crunches and falling oil, these companies are finding it difficult to continue to churn out the same amount of oil that has sent U.S. production surging to its highest levels in decades.
Ubben’s firm says it manages more than $19 billion. In a wide-ranging interview, Ubben discussed oil, his investing strategy and some of ValueAct’s top holdings.
U.S. crude settled more than 3 percent lower Monday, at $37.18 a barrel. It approached $40 per barrel after a recent rally, but has still fallen more than 30 percent in the last year.
To reach Ubben’s suggestion of $100 per barrel, oil prices would have to more than double.
Despite his bullish stance on the commodity, Ubben has his eyes on only one energy stock: Baker Hughes.
“Baker Hughes, to us, is the only place we’re really interested in playing right now,” he said.
The company is among ValueAct’s three largest investments, he noted. The stock has fallen about 25 percent in the last year.
Ubben also supported the management of Valeant Pharmaceuticals, another top ValueAct holding that is facing a clutch of worries. The drugmaker’s shares have fallen more than 30 percent this year amid the disclosure of a Securities and Exchange Commission probe, and the delay of its fourth-quarter 2015 results.
Ubben called Valeant CEO J. Michael Pearson “incredibly driven” and said “we’re solving problems (at Valeant) as we speak.”
Valeant has also dealt with leadership uncertainty, as Pearson recently returned to his post after recovering from pneumonia. Amid all the troubles, “We really haven’t been able to control the narrative at all,” he said.
Valeant is expected to report its fourth-quarter results Tuesday.