Even a global economic growth slowdown will not seriously impact the future of the shale oil patch, Rudolf “Rudy” Hokanson tells The Energy Report. The Barrington Research analyst's job is to think long and hard about the target prices he assigns to the best and brightest junior firms playing in the Bakken and other shales. He likes smart managers—the ones who know how to reduce costs at the wellhead while improving the flow of oil, gas, and liquids—and provides the names of companies with such managers at the helm.

The Energy Report: Is the energy sector undervalued?

Rudolf Hokanson: Energy is very undervalued. The market is not sure how to interpret what is going on in the world, and it runs scared of its own shadow. The market has a tendency to overreact to “The News,” and then to discount current pricing trends by focusing on near-term commodity valuations.

TER: What world news is implicated in the market's overreaction?

RH: There have been significant interruptions to energy production in Africa, and to energy delivery capabilities in Eastern Europe. Libya is increasing production. The Saudis are selling into Asia, while positioning themselves to be competitive into the U.S. market. Supply issues are driving the markets, as U.S. production grows and Organization of the Petroleum Exporting Countries (OPEC) production finds new markets.

TER: Is there an oversupply of oil and gas in the U.S market?

RH: We are not oversupplied here. Our refiners are happy to take U.S. crude; it is light, sweet, inexpensive and easy to refine. We can keep our refiners busy servicing the domestic market. Our production influences the international markets. Of course, demand could fall, rather than just slow, if global growth rates decline or slow too much. The Brent and WTI differential should even out over time, and there is always a need for energy for growth.

TER: What role are new technological advances playing in developing energy resources?