Following BP’s (NYSE: BP) Gulf of Mexico oil spill last summer, oil prices skyrocketed, and oil stocks plummeted during the event. The oil industry took another hit as the Egyptian protests rocked the stability of oil drilling and exportation in the Middle East.
Is It Time to Buy Energy Stocks?
When the global landscape is volatile, so is the price of oil. But when you know which side of the energy trend to be on, you can make big profits without taking on significant risk. It’s all about knowing what type of companies to invest in and when to strike.
So are we on the verge of one of those perfect striking times? Let’s take a look to see which companies are making the grade in this market environment.
Before making the leap into energy stocks, the first thing I look at is inventory. In North America we are awash in natural gas. There is simply too much inventory to create the boost to earnings that brings significant profits to investors like you and me. This is why I’m not moving into natural gas stocks anytime soon.
Looking at the inventory of crude oil, we can see that supplies remain near record highs. North America also tends to runs a lot on heavy, sour crude oil, which trades at a deep discount to light sweet, so many of our domestic energy companies are not benefiting from the high price of light sweet crude oil.
Also working against oil companies right now is the regulatory environment. The deepwater drilling ban in the Gulf of Mexico was devastating to the oil service industry, and even though this ban has since been lifted, the Interior Department has been dragging their feet on new drilling permits. So, many oil service companies remain depressed and are effectively being forced to move their operations to Northern Africa or elsewhere where there is robust drilling activity.
I expect that if I do recommend some energy stocks in the upcoming months that they will be multi-international companies due to the more hostile business climate in the United States for the crude oil industry.
In the meantime, here are some of the well-known energy stocks and how they stack up. If you simply must own energy stocks right now, choose carefully among the A-rated stocks and make sure you avoid the D and F stocks.
|COP||ConocoPhillips||Oil Gas & Consumable Fuels||B|
|CVX||Chevron Corp.||Oil Gas & Consumable Fuels||B|
|SUN||Sunoco Inc.||Oil Gas & Consumable Fuels||B|
|HES||Hess Corp.||Oil Gas & Consumable Fuels||C|
|IOC||InterOil Corp.||Oil Gas & Consumable Fuels||D|
|SWN||Southwestern Energy Co.||Oil Gas & Consumable Fuels||F|
|ESA||Energy Services of America||Energy Equipment & Services||A|
|DRQ||Dril-Quip Inc.||Energy Equipment & Services||C|
|NBR||Nabors Industries Ltd||Energy Equipment & Services||D|
|OIS||Oil States International Inc.||Energy Equipment & Services||A|
|RIG||Transocean Ltd.||Energy Equipment & Services||D|
|DO||Diamond Offshore Drilling||Energy Equipment & Services||F|