Investing

is now the time to invest in oil stocks?

  • Last Updated:
  • Oct 30th, 2020 12:05 pm
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Deal Fanatic
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Dec 28, 2007
7958 posts
4352 upvotes
Alberta
In the long term, it'll be fine. I have a bid in for 1000@20.00
Deal Addict
Aug 17, 2008
4323 posts
3466 upvotes
20/20: I should have sold at $30.

Will energy giant Shell quit Sarnia and oil sands?
September 6 at 5:15 PM ET

https://www.theglobeandmail.com/busines ... oil-sands/

"A blockbuster energy deal may be in the works, RBC analyst Greg Pardy said in a report last week. Based on conversations with industry executives and investors, Mr. Pardy said Canadian Natural Resources Ltd., one of the country’s largest energy companies, is contemplating buying Shell’s refineries in Ontario and Alberta, its 10-per-cent stake in the Athabasca Oil Sands Project and Chevron Corp.’s 20-per-cent position in the Athabasca property. The total price tag on this shopping spree is estimated to be $6.3-billion to $8.5-billion."
Deal Fanatic
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Jun 11, 2001
8730 posts
908 upvotes
I have ENB and SU... also PSI but super small position that really is nothing. All three are down about 2-4%... not too worried unless it hits like -25% or something drastic...

Length wise I'd like to hold ENB long, SU medium and PSI short.
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Deal Addict
Jul 23, 2007
4156 posts
2256 upvotes
No change here so far...... Only the pipelines for the energy sector. Still have ENB, TRP, KEY and PPL for long term holds. IPL I'll decide whether it goes or stays well before the end of this calendar year.
Jr. Member
Sep 23, 2016
117 posts
28 upvotes
anyone is brave enough to buy some oil stocks today? CPG is like 1.92 now... it was over 2.50 a few weeks ago lol..
Newbie
Jan 30, 2020
98 posts
88 upvotes
I bought CNQ today. Will be a long term hold. It could keep going down.
Deal Expert
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Sep 19, 2004
23620 posts
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where I belong
Wiretin wrote: I bought CNQ today. Will be a long term hold. It could keep going down.
I did, CNQ at $24, then it went lower @@ will hold for oil play and yields, at least seems better than SU?
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Newbie
Jan 30, 2020
98 posts
88 upvotes
jerryhung wrote: I did, CNQ at $24, then it went lower @@ will hold for oil play and yields, at least seems better than SU?

SU and CNQ so cheap it's hard to believe. adjusted for inflation they are at multi decade lows. if the world doesn't end from covid it's hard to see how an investment in energy doesn't pay off long term.
Jr. Member
Sep 23, 2016
117 posts
28 upvotes
such BS, WTI recovered over 3% and SU is flat; this feels like a lose lose situation -> WTI up, Cdn energy flat/down | WTI down, Cdn energy down
Member
Jul 30, 2012
449 posts
445 upvotes
Wiretin wrote: SU and CNQ so cheap it's hard to believe. adjusted for inflation they are at multi decade lows. if the world doesn't end from covid it's hard to see how an investment in energy doesn't pay off long term.
I've played the O&G sector from a trading perspective but have (almost) given up on the notion the sector can be a long-term viable (public) investment. Institutional money has all but given up on the sector as it doesn't meet the "new investing criteria" (ESG - Environmental, Social, & Governance). Institutional money is exiting the publicly-listed companies while Private equity is taking O&G companies private. Even at $45 WTI, many of these companies are cashflow positive which can make for good businesses but poor publicly-traded investments. I have played the sector for years and valuations have simply compressed to approximately 1/3 of historical averages and to coin a phrase have become "value traps". Warren Buffet (Berkshire Hathaway) recently acquired natural gas (Dominion Energy - $9.7 Billion) with the intention of owning a positive cashflow business. That company will no longer be exposed to the ongoing "blacklist" of non-renewable names institutions do not want to be publicly associated with.

After several years of abandonment, it's difficult to see what catalyst will draw institutional money back into a sector "their" investor base no longer wishes to be associated with. The most logical course for the Alberta Provincial Gov't is to use an NDP strategy of creating "Crown" Corporations. It would make much more sense for the Gov't to own profits vs royalties that provide a fraction of the revenue. Do a Buffet and have these companies 50%+>100% owned by the Gov't instead of languishing in the public markets at 25c on the $1. Blasphemous to say to a Conservative province, but Public markets and almost every other Provincial & Federal Gov'ts disregard O&G companies as relevant.
Deal Fanatic
User avatar
Sep 21, 2007
5135 posts
508 upvotes
Winnipeg
vince201 wrote: such BS, WTI recovered over 3% and SU is flat; this feels like a lose lose situation -> WTI up, Cdn energy flat/down | WTI down, Cdn energy down
HSE went down haha.. I didn't end up doubling my position.. 4.73 average.. I'm going to put my money elsewhere to hopefully recover the difference. I might start investing in leveraged oil ETF's again.. UCO.. USO.
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Newbie
Aug 15, 2016
48 posts
46 upvotes
DealRNothing wrote: I've played the O&G sector from a trading perspective but have (almost) given up on the notion the sector can be a long-term viable (public) investment. Institutional money has all but given up on the sector as it doesn't meet the "new investing criteria" (ESG - Environmental, Social, & Governance). Institutional money is exiting the publicly-listed companies while Private equity is taking O&G companies private. Even at $45 WTI, many of these companies are cashflow positive which can make for good businesses but poor publicly-traded investments. I have played the sector for years and valuations have simply compressed to approximately 1/3 of historical averages and to coin a phrase have become "value traps". Warren Buffet (Berkshire Hathaway) recently acquired natural gas (Dominion Energy - $9.7 Billion) with the intention of owning a positive cashflow business. That company will no longer be exposed to the ongoing "blacklist" of non-renewable names institutions do not want to be publicly associated with.

After several years of abandonment, it's difficult to see what catalyst will draw institutional money back into a sector "their" investor base no longer wishes to be associated with. The most logical course for the Alberta Provincial Gov't is to use an NDP strategy of creating "Crown" Corporations. It would make much more sense for the Gov't to own profits vs royalties that provide a fraction of the revenue. Do a Buffet and have these companies 50%+>100% owned by the Gov't instead of languishing in the public markets at 25c on the $1. Blasphemous to say to a Conservative province, but Public markets and almost every other Provincial & Federal Gov'ts disregard O&G companies as relevant.
Good post and think you are right in some respects. I also think you have to consider the context of commodity prices when looking at what has happened to valuations over the last five years. Volatility in oil and gas prices has created a cloud of uncertainty in the cash flows and returns of E&P companies. That volatility has mostly been a downward trend with very few periods where prices have spiked up. The ESG movement has made it easier for for institutional investors to 'give up' on the sector, but it is really just due to poor returns and uncertainty of cash flows.

The reason to own the sector at this point is for the recovery of demand, whenever that happens. If you believe things will normalize and people will begin flying again, the demand for oil will return to similar levels as pre-covid. When it does return, the supply side of the business which has been severely damaged, will not have the capital or the ability to respond the way it has over the last decade. This is why the companies that remain in the game will be beneficiaries of much higher commodity prices and this time, will have a much improved cost structure and capital discipline to provide high returns to shareholders. If or when that happens, institutions will have a much tougher decision to make on whether they want to sacrifice returns by not owning 'dirty oil' for ESG reasons.

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