Oil and gas companies worth investing in?
It affected at least 40% the world population oil consumption.
OilDemand WTI OilTankers ExonMobil BPAuthor: Admin
Published: April 29, 2020, 3:26 p.m. GMT+8
Last Updated: May 10, 2020, 9:54 p.m. GMT+8
Coronavirus outbreak causing the lockdown of most major cities in the world from the US, Europe, South Korea, Japan. It affected at least 40% of the world's population oil consumption. Due to limited economic activity, oil demand dropped for automobile, electricity and as feedstock for industrial application.
WTI Crude oil went down more than 70% since the last year. OPEC and other oil-producing countries agreed to cut production by 9.7 million barrels per day effectively on May till the end of June. It is the largest oil production cut in history to reduce the supply glut. This will help to lift the oil price up next month.
If OPEC and other oil producers didn’t cut their oil production, the lack of storage will become a major problem. For extra storage, most of the oil producers will store their crude oil on an oil tanker. Thus, this provides a good short- term opportunity for crude tankers to boom before the economy re-open and oil demands pick up again.
TNP is a shipping company based in Athens, Greece. It is a global provider of petroleum and crude oil and transportation services. It has 50 vessels in which most of them are mid-sized carriers. TNP is also a regular dividend payer with 5-year average dividend yield of 4.7%. Using our screener, the current quarter F-score is 9 out of 9. Teekay Corporation (TK) is a shipping company based in Bermuda. It operates in four major businesses, namely, offshore production, offshore logistics, liquefied gas carriers, and conventional tankers. It is also one of the largest crude tanker companies with 200 vessels. TNP is also a regular dividend payer with a 5-year average dividend yield of 5.31%.Using our screener, the current quarter F-score is 8 out of 9. Frontline Ltd (FRO) is a shipping company with 22 vessels consisting of 14 large crude carriers. It focuses on vessel management, crew staffing, and accounting. It has the annual trailing dividend of 4.72% Using our screener, the current quarter F-score is 7out of 9.
DHT Holdings, Inc. (DHT) is a shipping company with 18 vessels consisting of 14 VLCC. It is also a regular dividend payer with 7% 5 year average dividend yield. Using our screener, the current quarter F-score is 7 out of 9. SFL Corporation Ltd. (SFL) is a shipping corporation that owning, operating, and chartering 60 different large vessels. The business focuses on oil transportation, chemical transportation, and containers. It is also a regular dividend payer with 11.32 % 5-year average dividend yield. Using our screener, the current quarter F-score is 7 out of 9.
The dim outlook in the oil industry will make it very difficult for smaller companies attempting to restructure under Chapter 11 proceedings to get the necessary funding for the operation. The debtholders who would swap debt for shares may decline the offering of the shares. The worst-case scenario could present buying opportunities for the major leader of the industry. The industry’s major player with strong balance sheets will likely acquire smaller companies and take up a larger market share. Other than that, these industry major companies are integrated oil companies which are less susceptible to the crude oil price fluctuation than the upstream oil producer.
Exxon (XOM) is an oil and gas conglomerate that exploring oil and gas, processing feedstock petrochemical products, marketing lubricants and fuels for retail and industrial applications. It is a large-cap company with $185B market capital and a dividend payer with a 4.02 % 5-year average dividend yield. Using our screener, the current quarter F-score is 8 out of 9.
British Petroleum plc (BP) is an integrated large-cap energy company with a market capitalization of $ 76.7 B. The business segments including oil exploration, refining, manufacturing and marketing petrochemical products, delivering oil products and services. BP also ventured in alternative energy, particularly in biofuels and wind energy business. It is also a regular dividend payer with a 6.52 % 5-year average dividend yield. Using our screener, the current quarter F-score is 8 out of 9.
Phillips 66 Partners LP (PSXP) is a master limited partnership (MLP) formed by Phillips 66. The MLP processes crude oil, natural gas liquids (“NGL”), refines petroleum products. It also operates pipelines, terminals, and other transportation and midstream assets. It is a large-cap company with a $9.98B market cap and a dividend payer with a 4.61 % 5-year average dividend yield. Using our screener, the current quarter F-score is 7 out of 9.
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Companies that provide products and services at a very basic necessity will do well, the oil and gas companies are a good example of it. Once the economy reopens, large oil and gas companies will gain traction again and benefit from the overall demand surge. Crude oil will surge as the production cut on 1st May 20. Thus, buying the discounted large oil companies after the 1st or 2nd quarter announcement would be a good entry point for investment.