ConocoPhillips Is Well-Positioned for Oil Downturn - Pg.2 - TheStreetAfter unloading a pile of MLP's earlier this year, I am looking to get into XOM at around $70 - $72 for a long term hold and great dividend. This will be in my IRA account. Chevron is also on my radar as most of their operations are not in U.S. anymore and they have been beaten down pretty hard.
As crude goes further down later this year, one must look hard at the independent refiners as they are benefiting from the lower feedstock pricing. I'll have to say that premiums are already priced into these stocks (Valero, Marathon, Holley, Delek, etc).
I have worked in the oil & gas industry for 35 years and still play around part time as an engineering consultant here in Houston. Gut feeling is the service industry cuts are not finished yet and oil and gas producers are working hard to lower their service costs (contract drilling, well completions, workovers, etc). It would be prudent to stay away from the service sector stocks for a good bit.
Offshore operators are really in a funk, especially the contract drillers (Transocean, etc). This is an area I would stay very clear of.
ConocoPhillips Is Well-Positioned for Oil Downturn - Pg.2 - TheStreet
If you believe the bull case for Conoco it is pretty well outlined by the Street.com
This case is pretty much the same case that Boone Pickens is making for the oil industry as well. The issue is this, Conoco and many other companies have now figured out how to produce as much oil from 13 oil rigs as they used to produce with 32. This is not a positive to me for oil prices and oil debt but a deflationary pressure on oil prices for the medium term. If the bull case is correct and oil goes back to 70-75 next year then Conoco is going to do very well. If it does not though Conoco will not be cash neutral they will be in cash trouble, in which case they would either have to borrow to continue their dividend and capital or else cut back further, either will not be advantageous to COP.
XOM is far more flexible financially and if there is major problems ahead they will have the capital resources to take advantage of it and if there is a price recover to 75 XOM will rise as well, though probably not as far as COP.
Chevron is just not as efficient as XOM or COP in handling their capital but they would also do well if oil goes back to 75 and they pay a higher dividend than XOM and it is far less likely to be cut than the COP dividend.
I should have bought oil refiners late last year, when the news of the oil gush became well-known. With the gasoline usage up and them having better operating margins, these guys are having a good time. Darn! Despite my oft-claimed superior memory, I remember nuthin'. Wonder if it is not too late to get some.
It does not matter how green we want to be, the world cannot do without oil. And the low oil price already stimulates more driving, more muscle SUVs and trucks. People just do not learn.
Oil will come back, but I do not think it's any time soon. I sold off most of my energy stocks earlier in the year after they already dropped significantly off their high, as I was too slow to act. I've got too many scars on my hand for catching the falling knife, so I will wait before I buy them back. It may be towards the end of the year or early 2016.
Some smart folks I know think it will take a decade.
In the meantime it may still go lower. I occasionally hear $25 oil mentioned.
I listened to CNBC this morning while waking up and they said some North Dakota oil was being sold there for $29 a barrel.
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Maybe I'm missing something, but in morningstar I'm seeing the net expense ratio at about 1.10% for BCX
There has always been a discount for Bakken oil, primarily because it is so costly to get to market, mostly being transported by rail (another feature of dealing with the not so benevolent regional monopolist, Warren Buffet, who purchased Burlington RR). Having just returned from that area, and seeing all the idled rail cars sitting in Billings and Missoula, I'd think the discount would be narrowing. According to your story, it's not, however.
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XOM hit a 4% YIELD today down 8 percent on week
COP down 8 percent on week
CVX down 12 percent on week now yields 5.65%
KMI down 6 percent on week now yields over 6 percent
BHP down 8 percent on week now yields over 7 percent
MMP down 4.5% on week now yields 4.4 percent
Oil at $40 a barrel
XOM and MMP are the only 2 I would dip my toe on, did buy some MMP @67 today replacing KKR who fortunately I had sold @ 22.41 on Monday along with WFC @ 57.45 lowering my net equity exposure this week by 2 percent, I have no replaced WFC in my portfolio though the market cut that by a bit more these last 2 days.
This does have the potential to get very ugly
Scars on hand? That's not so bad. FF to 3:40 on this video.