Benefits Of Investing In Oil And Gas
Oil and gas stocks can produce significant capital gains from share price appreciation and attractive dividend income during periods of high oil and gas prices. As crude oil prices rise, oil companies tend to generate gushers of cash. That gives them more money to drill additional wells to increase their oil and gas production, repay debt, repurchase stock, and pay dividends, all of which can create value for shareholders. Of note, dividend payments in the sector tend to be higher than average because of the amount of cash oil companies can generate during good times. That often makes the sector attractive to investors seeking high dividend yields.
Because of the industry’s upside potential during periods of economic growth, oil and gas stocks can be smart investments if timed right. While The Motley Fool does not advocate for attempting to time the market, oil and gas investments made just as the economy transitions from a recession to an expansion can turn out to be wise moves. The economic recovery should fuel higher oil prices, enabling investors to benefit from rising share prices and dividends.
Northern Oil And Gas Inc In The Eye Of Market Gurus
During the last month, 9 analysts gave the Northern Oil and Gas Inc. a BUY rating, 1 of the polled analysts branded the stock as an OVERWEIGHT, 1 analysts were recommending to HOLD this stock, 0 of them gave the stock UNDERWEIGHT rating, and 0 of the polled analysts provided SELL rating.
According to the data provided on Barchart.com, the moving average of the company in the 100-day period was set at 20.75, with a change in the price was noted +6.95. In a similar fashion, Northern Oil and Gas Inc. posted a movement of +44.02% for the period of last 100 days, recording 972,397 in trading volumes.
Finding The Balance: Where Are The Opportunities For Portfolio Renewal
Upstream spending will also need to shift to align with changing investment priorities. Portfolio resilience will be key. Many capital intensive, long life upstream projects yielded low double digit, or even single digit, returns at US$50 a barrel, even before decarbonisation was in the spotlight. These types of projects are at risk as investors chase lower volatility returns and maximum value. But there are plenty of opportunities available for companies to get it right. We assess the main options for portfolio renewal.
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Why Choose Cunningham Energy
So, should Cunningham Energy be your oil investment company? We know where the oil and gas is and we know how to get it. A lot of it is in the Appalachian Basin, and we have a vast inventory of personnel and equipment working overtime to extract it from this and other locations, using a variety of methods, from traditional drilling to horizontal drilling and more.
Our plans for these and other oil fields are only growing, with a projection of 300,000 feet of oil field drilled by the end of 2018. We supplement our oil drilling efforts with natural gas drilling efforts, purchases of existing producing oil wells, and the sale of our services and the use of our state-of-the-art equipment to other companies in possession of oil-rich territory in the area.
Need For Investment Is Critical For Oil Gas Industry: World Petroleum Congress Panelists
2021 investment down 23% from 2019
Next 2 years ‘critical’ to restore output: study
Permian remains ‘growth engine’ for US
More investment is needed in the upstream oil and gas sector not only to sustain production as global demand grows, but to drive the transition to cleaner energies, conference panelists said Dec. 7.
Oil and gas investment declined in 2020 and 2021 because of the pandemic, which is a “recipe for more volatility,” Joseph McMonigle, secretary-general for the International Energy Forum, said on a panel at the World Petroleum Congress.
“Capex cuts by international oil companies and national oil companies in 2020 was about 35%,” he said. “We’re now showing another 23% reduction in capex levels” from pre-pandemic levels this year.
In 2019, E& P companies spent $525 billion, an amount which plummeted to $341 billion in 2021, he added.
“We have to get back to $525 billion over several years until 2030 to restore market balance,” McMonigle said. “I’m afraid what we’re seeing with the energy crisis is on our doorstep.”
According to a report released Dec. 7 by the IEF and IHS Markit, the “next two years will be critical for sanctioning and allocating capital toward new projects to ensure adequate oil and gas supply comes online within the next 5-6 years.”
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How To Invest In Oil And Gas: Understanding The Oil Industry
The oil industry has been a powerhouse for decades, but has recently undergone some rapid changes.
In 2018, the US overtook Saudi Arabia for the first time in two decades to become the world’s leading producer of crude oil at 17.9 million barrels per day . In 2019, that figure rose to 19.5 million bpd, although it fell to 18.6 million bpd in 2020 due to a slowdown of operational activities brought on by the COVID-19 pandemic.
The US Energy Information Administration forecasts that global oil consumption will average 97.5 million bpd for 2021, an increase of 5.1 million bpd over 2020.
Of course, the COVID-19 pandemic has had a significant impact on energy markets, particularly oil. “Oil is bearing the brunt of this shock because of the curtailment in mobility and aviation, which represent nearly 60 percent) of global oil demand,” a 2020 International Energy Agency report states.
In itsoil and gas industry outlook for 2022, Deloitte reflects on the strong rebound the oil and gas industry made in 2021, noting that oil prices jumped to their highest point in six years. Going forward, the firm sees volatility returning to the oil and gas market, and states that the oil and gas companies that will perform well in these conditions will be those that can “reinvent themselves by practicing capital discipline, focusing on financial health, committing to climate change, and transforming business models.”
How To Invest In Oil And Gas: What About Oil Stocks
Beyond futures, options and ETFs, investors may want to look at traditional oil stocks, which allow for direct investment in oil exploration, development and production companies.
Oil stocks that offer strong dividendoptions and have high liquidity include ExxonMobil , BP , ARC Resources ConocoPhillips , Suncor Energy and Chevron . In terms of smaller-cap oil stocks that investors should keep an eye on, check out the Investing News Network’s look at the top oil and gas stocks on the TSX and TSXV.
In mid-2021, Alex Kimani of Oilprice.com offered up a few oil stocks for investor consideration. Kimani suggested investors look at Marathon Oil , Northern Oil and Gas and Devon Energy .
There is of course risk associated with investing directly in publicly traded companies. Understanding whether the company has entered production or is still drilling and exploring is crucial. The type of project is also important, as traditional production is extremely different from hydraulic fracturing.
Partnerships are also commonplace in the sector, so investors should know whether a company owns its project exclusively or is part of a joint venture.
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Oil And Natural Gas Futures
Short of buying barrels of oil and storing them in your garage, futures are one of the most direct ways to invest in oil and natural gas . Unfortunately, futures can also be complex and risky.
A futures contract is an agreement between a buyer and a seller to complete a transaction at a set price, at a set date in the future. For example, you could sign a futures contract with an oil seller to buy 1,000 barrels of oil at $50 on June 30, 2021. On that day, youd pay the seller and they would deliver the barrels to you.
Futures were originally designed for use by large businesses that wanted more certainty in their raw materials costs. If a company relies on a commodity, it can significantly affect its profits if the commodity price changes rapidly. Futures let a buyer secure prices for the raw materials it needs months ahead of the time they actually need to receive the goods, making production costs more predictable.
Investors can now use futures bought and sold through platforms like E*Trade to speculate on changes in commodity prices. If you buy an oil futures contract at $50 and the price per barrel rises to $60, you could sell that contract to another party for a profit. The original seller of the contract must deliver the oil at a price of $50 per barrel, so the holder of the contract gets to buy oil below the market rate.
However, if the price of oil falls to $40, the contract holder wont be able to sell the contract at a profit. Instead, they will lose money.
Is Oil Going Up Or Down
The EIA forecast that Brent crude oil prices will average $71/b in the second half of 2021 and $66/b in 2022. Oil prices are recovering due to higher demand as more COVID-19 restrictions ease. OPEC is gradually increasing oil production after limiting it due to a decreased demand for oil during the pandemic.
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Understanding Oil And Gas Investments
The main risk associated with oil and gas investments is price volatility. For example, the industry encountered substantial volatility in the commodity prices in 2014 and 2015 due to a supply glut of crude oil and natural gas. The high levels of supply have hurt stock prices.
In the spring of 2020, oil prices collapsed amid the economic slowdown. OPEC and its allies agreed to historic production cuts to stabilize prices, but they dropped to 20-year lows.
The price of crude oil dropped substantially in the first quarter of 2020. Oil went from over $107 a barrel in July 2014 to around $20 in March 2020. Natural gas followed suit, going from $4.80 per one million British Thermal Units in June 2014 to around $1.60 per mmBtu as of March 2020, a drop of around 70%. Natural gas is notorious for being seasonal and volatile in its price due to greater demand during the winter. However, the drop, caused by the global lockdown and the split between OPEC and OPEC+ over production cuts, plunged prices for fossil fuels to historically low levels. In April 2020, the price of a barrel of West Texas Intermediate , the benchmark for U.S. oil, fell as low as minus $37.63 a barrel. This means oil producers paid buyers to take the commodity off their hands over fears that storage capacity could run out in May 2020.
Demand for oil during the COVID-19 crisis initially dried up as lockdowns across the world kept people inside, but bounced back into the summer of 2021.
Is Oil A Good Investment For You
Do oil and gas belong in your portfolio? Direct investments in energy projects can bring substantial and nearly immediate tax advantages, while diversifying investments and bringing potentially higher returns. Such benefits make oil and gas investments worth considering in your overall strategy.
Oil and gas may be a good investment for some, but not for others. There are there qualifications to be met, risks to be managed, and choices to weigh. The best investments in this space are for accredited investors only. Some investors prefer to invest their dollars towards greener alternatives, while others are attracted to the more proven track record of profits in the oil and gas industry.
You may have other questions about investing in oil and gas. Chances are, we have answers! Partners for Prosperity specializes in growing wealth outside of the stock market. Book a complimentary consultation today to learn more about hedging risk, increasing cash flow, and creating wealth that is not dependent on Wall Street risks!
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How To Attract Value Investors
Are you effectively and wisely using FCF and ROCE to increase dividends or to fund growth? Are you reshaping your business in order to increase dividends in all market cycles? If youre ready to win the value investors confidence , consider the following steps:
Gain a granular and comprehensive understanding of revenue and costs
To deliver competitive earnings regardless of oil-price swings, the industry needs to look deeply at real costs and revenue at the most granular level, in ways few in the industry have done previously. Gaining a high-resolution vision into the organization entails leveraging existingyet enormousamounts of data on all transactions and determining whether those activities and assets are accretive or dilutive.
Anything that does not create a net profit when commodity prices are low suggests two things: 1. the parts of the business that are profitable in the low oil price cycle are effectively subsidizing parts of the business not contributing to earnings and 2. the dividend is at risk.
Additionally, getting such a granular vision can likely enhance managements ability to take firmer control of financial and operational performance to instill confidence in value investors. As oil and gas companies feed more to the bottom line and unlock greater FCF, the more they can feed the dividend.
Improve cost management
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Right-size based on best-performing businesses
Best Value Oil And Gas Stocks
These are the oil and gas stocks with the lowest 12-month trailing price-to-earnings ratio. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows youre paying less for each dollar of profit generated.
|Best Value Oil and Gas Stocks|
- California Resources Corp.: California Resources is an independent oil and natural gas exploration & production company with operations located in California.
- Baytex Energy Corp.: Baytex Energy is a Canada-based oil and gas company. It is focused on the acquisition, development, and production of crude oil and natural gas in both Canada and the U.S.
- Surgutneftegas PJSC: Surgutneftegas is a Russia-based oil and gas company engaged in exploration, drilling and production, oil refining, and gas processing. Its E& P operations are located in three of Russia’s oil and gas provinces.
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Earnings Compared To Manufacturing
Over the last five years, average earnings for the oil andnatural gas industry have been below the rest of theU.S. manufacturing industry, averaging about 4 centsfor every dollar of sales compared to nearly 9 centsfor manufacturing. By the second quarter of 2015, theaverage for the oil and gas industry fell to minus 21.9 centon the dollar compared to 7.1 cents on the dollar for allU.S. manufacturing as the price collapse of crude oil tookits toll on U.S. oil producers.
Like other industries, the oil and natural gas industrystrives to maintain a healthy earnings capability. It doesso to remain competitive and to benefit its millions ofshareholders, across the country and in all walks oflife. Healthy earnings also allow the industry to invest ininnovative technologies that improve our environmentand increase production to keep America going strong even as it leads the search for newer technologies, andnew sources of energy that will provide a more securetomorrow.
About Blackstone Oil And Gas
Blackstone Oil and Gas was established in 2007 to invest in Texas, Oklahoma and California oil and gas opportunities. The company mission evolved, and Blackstone Oil has become a workout and turnaround specialty company for distressed oil and gas companies. Blackstone consults with such companies to facilitate their restructuring, secure financing as well as asset acquisition. Blackstone’s considerable experience working with companies before and throughout the complex reorganization process, makes the company uniquely situated to capitalize on opportunities and acquire distressed oil and gas assets with significant upside potential. These acquisitions are substantially more lucrative because they are backed by our management’s knowledge and experience in the oil and gas industry, natural resource infrastructure, and the turnaround process.
Blackstone Oil is expanding its portfolio by building relationships with investors in oil, gas, and energy, and to acquire existing ventures in these industries throughout the United States, with particular focus on the oil rich states of Texas, Oklahoma and California. To that end, we have established valuable working relationships with top-level petroleum engineers, geologists, counsel and advisers. These industry professionals, who consult on potential projects for Blackstone, have worked in oil and gas production in Texas, Oklahoma and California for the past 50 years, totaling more than 200 years of collective experience.
Youve Decided To Invest Now What
As the global economic landscape of the energy industry changes, more international companies are seeking to invest in the US oil and gas industry. As they develop investment strategies, key questions arise, including:
Oil Prices Are Sizzling As The Economy Reopens Here’s A List Of Energy Stocks That Analysts Love And Could Be Worth Watching For The Remainder Of The Year
Among the market’s major sectors, energy stocks are often the most volatile.
After all, other businesses such as retailers or automakers or tech companies have a measure of control over how much they can choose to sell their goods for. Unfortunately, energy stocks typically are at the mercy of market conditions because they deal in commodities like crude oil and natural gas that have very visible and fixed pricing.
That was a decidedly unfortunate dynamic for energy stock investors in 2020, as the COVID-19 pandemic sapped demand and prices for oil and gas plummeted as a result.
However, it’s turning out to be quite a boon in 2021 as the global economy gets back on track. These fossil fuels are increasingly in demand at a time when many producers have curtailed operations and constrained supply over the last 12 months, which is creating tailwinds for many oil and gas firms.
As we look to the remainder of 2021, here are 10 energy stocks that are among the top-rated on Wall Street. Like with any investment, none of these are a guarantee to keep rising, especially if underlying commodity prices retreat. Still, investors can improve their chances by heeding the “smart money” and taking note of which energy stocks the pros believe will lead the sector’s continued recovery.
1 of 10
- Dividend yield: N/A
- Analyst ratings: 13 Strong Buy, 7 Buy, 1 Hold, 0 Sell, 0 Strong Sell
- Dividend yield: 2.9%
- Analyst ratings: 18 Strong Buy, 8 Buy, 2 Hold, 0 Sell, 0 Strong Sell
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