FUNDVIEW-Brewin Dolphin looks for upstream oil, gas growth

* "Leverage on likely rise in oil prices" -- Brewin Dolphin

* Buy Tullow (TLW.L), Petrofac (PFC.L), Amec (AMEC.L)

* Think twice about oil majors

By Christopher Johnson

LONDON, Jan 22 (Reuters) - Investors wanting growth in the energy sector should look at upstream companies that will benefit from higher oil prices and think twice about oil majors and downstream firms, Brewin Dolphin Investment Management says.

Iain Armstrong, divisional director of research for Brewin Dolphin, which says it is Britain's largest independent private client fund manager, likes companies with fast growing oil and gas reserves or companies focused on new production.

The wealth management group, which controls 21 billion pounds ($34.28 billion) of assets of which around 2 billion are in energy, is much more cautious on the major oil companies.

"I am bullish on the oil price, therefore I think you should invest in companies that can benefit from rising oil prices and rising production," Armstrong told Reuters in an interview.

"I am looking for companies that can leverage off the rising oil price, either through increasing production or increasing reserves and have good cost control."

He expects oil prices to move higher gradually as oil demand recovers with economic activity and sees a movement by other funds into oil assets.

Armstrong, who provides buy-side analysis to hundreds of private wealth managers, favours London-based explorer Tullow as well as British energy services companies Amec and Petrofac.

He also likes BG Group (BG.L) due to its fast upstream growth and BP (BP.L) after its recent cost-cutting programme.

But he is much more cautious on several majors including Royal Dutch Shell (RDSa.L), despite big holdings in the company.

Brewin Dolphin's top three energy holdings are Shell, which accounts for about 3 percent of its total investments, BP, which represents around 2.5 percent, and BG Group which is still only around 1 percent of its investments but growing.

OVERWEIGHT OIL AND GAS

Armstrong is telling his fund managers to be overweight oil and gas and to look at upstream rather than downstream.

"I like Tullow because they have got two very important oil and gas developments coming on stream in Ghana and Uganda. Ghana starts in the third quarter of this year and Uganda will probably come on sometime in 2011 and 2012," he said.

"Tullow has made two of the largest finds of the decade with around 2 billion barrels of oil. They have only really started exploring the potential."

He said Tullow was likely to add about 75,000 barrels per day (bpd) in oil production from Uganda and about 40,000 bpd from Ghana: "Those two operations are company transforming.

"They keep on drilling and they keep on finding more and more oil," he said. "The shares are still very, very cheap."

Analysts have raised valuations and reserve estimates for Tullow in recent weeks following a series of boosts upstream.

Tullow said on Thursday a well offshore Ghana proved the existence of a major new field, boosting hopes that drilling in neighbouring countries would also yield finds. [ID:nLDE60K08B]

Tullow shares jumped almost 4 percent to a record 1,375 pence on Thursday, before slipping back to 1,270 by 1230 GMT on Friday. It ended 2008 around 660p.

Armstrong said investors should be wary of some majors.

"The trouble with the majors is they have very large legacy assets, and they are depreciating at between 5 and 8 percent per annum. They have to replace those reserves just to stand still."

Brewin Dolphin also likes Petrofac, which has "an excellent story based on the expected growth in production in the Middle East", Amec, and BG Group, which has "good cost" and has "sold forward contracts at levels based on the peak in the oil price". ($1=.6126 Pound) (Reporting by Christopher Johnson; editing by Keiron Henderson)