Investing

is now the time to invest in oil stocks?

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Banned
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Jun 22, 2012
4737 posts
696 upvotes
Shhanada
G-Yo wrote: Oil looks to be bottoming out here, although I can see it going a little lower. On the other hand I wouldn't be surprised if it shot back up to $70-80 by the summer.
Maybe, but lots of pundits are now crying for $40's, which can be self-fulfilling. Plus you don't need a long memory to recall when oil collapsed to the $30's on less substantial evidence than we have now. All you need is someone to add credible alternative energy speculations to the mix and oil related stocks could experience another thrashing. Or not.

My play is CPG because I think they are better managed and the share price has already taken a disproportionate nose dive. I'm fully aware it can tank more but that will either be slight in which case I don't care, or steep, in which case I will average down. I'm also aware they could still sacrifice their own dividend, perhaps to seize buying opportunities or to keep their balance sheet from melting down, either of which doesn't bother me.

What I'm more surprised about is how alternatives and things like Tesla haven't collapsed even more. They've been valued on the notion of replacing expensive oil but that thesis has vanished for the foreseeable future.
Newbie
Dec 28, 2014
25 posts
1 upvote
I think it's a good time to invest, but you need to make sure you do your research and recognize that some oil stocks are definitely inferior to others. For example, COS is entirely unhedged and carries most of their debt in USD so they will be banged up for a long-long time. I think there break-even cost is $65 per barrel without their dividend. On the other side, a little known company EGL just recently clear all their debt and has a surplus of cash and are largely hedged until 2016, so they may be able to whether this storm (though I expect their dividend will be cut at some point). Do your research and see who is hedged!
*BTW, as a disclaimer, I have owned both of these and used them as examples since I have researched them both.
Deal Addict
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Aug 4, 2014
3098 posts
3090 upvotes
Toronto, ON
SurplusPlus wrote: My play is CPG because I think they are better managed and the share price has already taken a disproportionate nose dive.
Yep, I bought 100 shares each CPG and HSE a few month ago, they were 10 bucks apart ($43 and $33). Now they're trading in the same $27-$28 range, and today saw CPG 10 cents below Husky!

Making my monthly RRSP deposit tomorrow - and buying more CPG in January... :)
Deal Fanatic
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Oct 9, 2008
5681 posts
2233 upvotes
Thornhill
Dec 31, 2014.

Another decline in oil just before the New Year.

Crude Oil (WTI) USD/bbl. $52.69
Crude Oil (Brent) USD/bbl. $56.09
Penalty Box
Aug 11, 2005
4175 posts
1422 upvotes
So why exactly did oil ppb drop so significantly in the last 6 months? I understand that it is a supply vs demand explanation, but the US fracking didn't just happen overnight. Why wasn't there more of a steady decline as opposed to the ppb losing 50% of its value in 6 months?
Penalty Box
Apr 16, 2012
3565 posts
685 upvotes
Greely
Luckyinfil wrote: So why exactly did oil ppb drop so significantly in the last 6 months? I understand that it is a supply vs demand explanation, but the US fracking didn't just happen overnight. Why wasn't there more of a steady decline as opposed to the ppb losing 50% of its value in 6 months?
Same reason why real estate in us crashed.

Did houses suddenly pop up out of nowhere in 2007?


Same reason why stocks crashed in 09.

Did companies suddenly all go bankrupt? Yes some did like Lehman and GM, but the entire economy? Nope.


As an RE bear, I'm surprised you don't understand this.
Banned
User avatar
Jun 22, 2012
4737 posts
696 upvotes
Shhanada
Luckyinfil wrote: So why exactly did oil ppb drop so significantly in the last 6 months? I understand that it is a supply vs demand explanation, but the US fracking didn't just happen overnight. Why wasn't there more of a steady decline as opposed to the ppb losing 50% of its value in 6 months?
When there's a consensus of sentiment that's when we see big collapses. Another factor is that people found out that oil storage has been overwhelmed, which speaks to not only immediate supply/demand dislocations but future ones as well. Plus a variety of alternatives both practical and speculative have been gaining momentum.
Deal Guru
Feb 9, 2009
10051 posts
7976 upvotes
Oil is going to the 40's and I think oil stocks go through one more decline and then I'll come in and buy...
Deal Fanatic
User avatar
Oct 9, 2008
5681 posts
2233 upvotes
Thornhill
January 2, 2015

Another CAPEX reduction and 56% annual dividend cut from Linn Energy/LinnCo (NASDAQ:LINE and NASDAQ: LNCO)

"The board approves a 2015 budget with oil and gas capital expenditures of $730M - down 53% from $1.55B in 2014 - and a 56.9% cut in the annual distribution of both LINE and LNCO."
Banned
User avatar
Jun 22, 2012
4737 posts
696 upvotes
Shhanada
SurplusPlus wrote: Maybe, but lots of pundits are now crying for $40's, which can be self-fulfilling. Plus you don't need a long memory to recall when oil collapsed to the $30's on less substantial evidence than we have now.
Tada.
Deal Addict
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May 11, 2014
4245 posts
4744 upvotes
Iqaluit, NU
There was a article on the globe about how some oil and gas producer's bonds are now yielding 9~10%, and how some companies such as Precision Drilling's are worth investing as they can scale back investment and drilling, and are still producing income from wells already drilled. If oil prices happen to recover, you could look at an increase in the bond price easily. Might be worth considering, except my broker has a limited bond selection. Any thoughts?
Deal Addict
User avatar
Feb 25, 2014
2170 posts
339 upvotes
Mississauga
xgbsSS wrote: There was a article on the globe about how some oil and gas producer's bonds are now yielding 9~10%, and how some companies such as Precision Drilling's are worth investing as they can scale back investment and drilling, and are still producing income from wells already drilled. If oil prices happen to recover, you could look at an increase in the bond price easily. Might be worth considering, except my broker has a limited bond selection. Any thoughts?
I think bonds are very less profitable for my taste
Penalty Box
Dec 27, 2013
8003 posts
3988 upvotes
Toronto
Jeenyus1 wrote: January 2, 2015

Another CAPEX reduction and 56% annual dividend cut from Linn Energy/LinnCo (NASDAQ:LINE and NASDAQ: LNCO)

"The board approves a 2015 budget with oil and gas capital expenditures of $730M - down 53% from $1.55B in 2014 - and a 56.9% cut in the annual distribution of both LINE and LNCO."
OMG LINN ENERGY IS AT $11. That is freaking amaazing.
Deal Fanatic
May 5, 2008
5397 posts
2110 upvotes
Winnipeg
Are there any etfs strong in oil?
Newbie
Dec 25, 2014
9 posts
1 upvote
Surrey, BC
airmail wrote: Are there any etfs strong in oil?
No one knows how low oil prices will get. One thing I do know is they will eventually go up and far above what they have been last few years.... i got my money on these 3 etfs CLO, ZJO and HXE....
Penalty Box
Dec 27, 2013
8003 posts
3988 upvotes
Toronto
CLO is good. touch a nice low today. lowest was about 2 weeks ago though hit like 8.50. I'd start dollar cost averaging if you want to get in. thats what im doing.
Member
Nov 8, 2009
455 posts
157 upvotes
aneikgandhi wrote: No one knows how low oil prices will get. One thing I do know is they will eventually go up and far above what they have been last few years.... i got my money on these 3 etfs CLO, ZJO and HXE....
I assume your talking about 5 years + timeframe. Of course you could say that about any commodity due to inflation. However, I don't think we'll be seeing 100+ oil for at least 3 years but that's just my estimate.
Member
Jul 1, 2009
364 posts
54 upvotes
Coquitlam
daivey wrote: CLO is good. touch a nice low today. lowest was about 2 weeks ago though hit like 8.50. I'd start dollar cost averaging if you want to get in. thats what im doing.
Negative eps.. I dunno

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