Looking for a rational explanation as to why light oil plays are trading at a significant discount to LY SP's verses heavy oil producers?  You're not going to find one...

 

I took a sample of Heavy Oil Producers and Light Oil Producers for this exercise using the trading prices of these stocks exactly 12 months ago...  Also reviewed heavy oil prices verses light oil prices over the first 2 months of 2012 and YTD.

 

Heavy Producers for this exercise:

SU /CNQ /BTE /HSE - Share Price Group Change Trailing 12 months_ Down -10.5%

Heavy Oil Crude Price Change - Jan/Feb '12 vs Jan/Feb '13_Down -22.5%

 

Light Producers for this exercise:

CPG  /PBN /LEG /PWT /RPL - Share Price Group Change Trailing 12 months_Down -30% (Yes, even CPG was down by 10% itself)

Light Oil Price Change - Jan/Feb '12 vs Jan/Feb '13_Down -7%

 

My Point: 

Heavy producers are down less than 1/2 of the actual change in Crude Price using the 2-month period (in other words they are becoming more expensive).

Light Oils are down more than 4x's the actual change in light oil price using the same 2-month period (in other words valuations are becoming much cheaper_moreover we know there will not be a significant production decrease from either group).

 

No logic that I can see other than market sell off of mid caps... Additionally, most recent Edmonton Par using Feb '12 vs Feb '13 shows only a -2% discount YOY at this point for light oil producers. 

 

I would think Mr. Market will eventually catch up on these.

 

Continued DD:)