Oil is something that the United States consumes more than it produces. The rising oil prices have been proved to be harmful to both the U.S. economy and the U.S. stock market. However, the same rising oil prices are good for oil companies. On the other hand, falling oil prices have benefitted the U.S. economy immensely, and the stock market as well. However, it has proved detrimental to the profits of the companies. Changing oil prices have an opposite effect on oil stocks and non-oil stocks. Any investment in oil stocks can act as a good hedge (within one’s stock portfolio). This helps to reduce the volatility of an investment portfolio, which rises when other stocks are falling and falls when the other stocks are rising. It was the weakening global economy that leads to the drop in global oil demand. The sharp drop is the reason for the rapid fall in oil prices.
Investment wizard, philanthropist and business magnate Warren Buffet follows a system of creating a list of top 10 companies in that sector and buying their stocks when the price comes down to an attractive level. The top oil industry stocks were depressed in 2016 to relieve the oil oversupply that kept the price down. They have limited the production of the product, giving oil prices a boost of $50 per barrel and will continue to do so till there is a reasonable return on the investment. The oil production output has been reduced by OPEC countries by 1.2 million barrels and half-million barrels by non-OPEC countries and a million by North America.
There are five stocks which are the top oil industry stocks waiting to turn the high oil prices into profit. Each company is gathering assets that will give income in 2017. Through efficiency measure, the companies have managed to survive and ready to expand if oil climbs in the second half of 2017. They are listed below:
EOG Resources: They have a unique method of choosing drilling sites. It always tries to find a premium site that gives them 60% after tax when oil is sold at $50 per barrel or more. Oil below $50, it can still be profitable but EOG has used this period of depressed oil prices to get rid of non-premium sites and to acquire premium ones. The revenues have risen in the last four quarters, helping the company to cut its losses.
Comstock Resources Inc.: Texas has a success story with two breakouts in August 2016. Quarterly reports show an increase in revenue and positive income.
Devon Energy Corp.: They reported positive income in the last three quarters. The stock has been in a downward spiral since December 2016. Oil surplus has been predicted in 2017 and Devon could rise again. Investors can buy in on this downward trend or wait for a breakout.
Enterprise Products Partners LP: This is a pipeline and storage company. It is less susceptible to the change in the price of oil. It has contracts with companies for transportation and storage of oil. They also run docks, and exports liquefied petroleum gas. The stock rose until February 2017.
Atwood Oceanics Inc.: They were hit hard by the downturn. The company puts up ocean rigs, and many companies did not find ocean drilling attractive with oil at $40 a barrel and below. The rise in oil prices puts Atwood in a position to service the oil company’s needs who want offshore rigs. They drill worldwide. Keep a watch on the oil prices and thoroughly go through each of the top oil industry stocks to see they are taking advantage of the relief from oil oversupply.
Large companies are a safe investment as they are exposed to different segments of oil and gas value chain. Low oil prices can destroy profits and cash flow of independent producers.
Industry’s strong equity performance will continue; OPEC’s agreement will hold at least through the second half of the year; as companies are spending at or above cash flow that service costs can go up 5% to 10%, but any more would crimp expansion.
They, like Pioneer along with EOG Resources Inc. (NYSE: EOG) and Continental Resources Inc. (NYSE: CLR), are among the big caps; Resolute Energy Corp. (NYSE: REN) and PDC Energy Inc. (NASDAQ: PDCE) among the small-to-medium caps; and Gulfport Energy Corp. (NASDAQ: GPOR) and Range Resources Corp (NYSE: RRC) among “gassy” producers, although they’re cautious on 2018 gas prices. Call on Petroleum Co. (NYSE: CPE) and Flotek Industries Inc. (NYSE: FTK) is also on the firm’s best ideas list.
Other analysts mention Devon Energy Corp. (NYSE: DVN), Occidental Petroleum Corp. (NYSE: OXY), Diamondback Energy Inc. (NASDAQ: FANG), Anadarko Petroleum Corp. (NYSE: APC) and Hess Corp. (NYSE: HES) as their favorites among oil and gas producers and Schlumberger Ltd. (NYSE: SLB), Core Laboratories NV (NYSE: CLB) and Nabors Industries Ltd. (NYSE: NBR) as tops among oilfield products and services providers.
