Oil company stocks remain a good investment due to the developing energy crisis and resulting oil shortage in the U.S. and the world. Oil & gas prices are soaring, oil reserves are declining, peak oil is approaching, and the stock prices of energy-related companies - large (major) oil companies, small oil companies, alternative energy companies, and oilfield services companies - should continue to climb.
Are you ready for an investment in an oil producing company or do you prefer to invest in alternative energy company stocks or other energy-related stocks? What about investments in companies engaged in oil refining, tanker operations, oilfield services, or natural gas production?
Mutual funds that specialize in oil companies, may be the best energy stock investment if you are as cautious as I am.
Some folks will make profits from the oil stocks during the energy crisis. It might as well be you!
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Breaking News!
In the past few weeks, three items of significant importance to oil company stock investors have occurred:
1. Activity in the Bakken Formation of North Dakota, adjacent states and adjacent Canadian provinces has become red-hot as word of the immense size of oil potential of the Bakken Formation has become better known. Oil companies are now flocking to North Dakota to work on the prolific but difficult-to-recover Bakken oil. High oil prices and improved drilling technology (notably in horizontal drilling) now allow the oil to be recovered profitably. For more details on some of these oil companies involved, see Large Oil Company Stocks and Small Oil Company Stocks.
2. A giant oil field - Carioca Field - has been discovered offshore of Brazil by Petrobras. The estimate of 33 billion barrels for the size of the oil field would make it the third largest oil field.
3. A revolutionary cover article appeared in Time Magazine The article casts doubt on the wisdom of using Ethanol and biofuels as alternative energy sources. This article is so impressive that it is likely to cause changes in how we look at Peak Oil and alternative energy. It also makes the discoveries in the Bakken Formation and offshore Brazil that much more important........we desperately need the new conventional oil!
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My present outlook for the energy crisis and for oil & energy company stock investing is as follows:
Peak oil is still on the way but its arrival has been temporarily delayed by development and improvement of existing oil and gas fields, discovery of a few new oil and gas fields (notably in the deep Gulf of Mexico, the Bakken Formation of North Dakota, and, most impressively to me, offshore Brazil), and, finally, by development of certain alternative energy sources such as oil sands, wind energy, hybrid cars, LNG, etc. Recovery of oil from oil sands and recovery of gas from tight gas formation are being ramped up especially fast in North America. LNG and wind power is moving rapidly overseas. Ethanol is moving fast around the world but is now coming under pressure as evidence mounts that the production of ethanol for gas-blending purposes is pushing up the price of food.
In addition to the above additions of energy supplies, aggressive energy efficiency improvements are being developed and have the potential, if fully implemented, to make a major impact in reducing energy demand as did the energy efficiency improvements of the 70s, 80s, and 90s during past energy crises.
Despite the above somewhat rosy scenario regarding the conventional oil & gas discoveries and alternative energy development, we are still rapidly running out of oil, and there is still, as yet, no complete substitute for oil and natural gas, and supplies of the two fossil fuels will continue to decline (demand will increase!) as Peak Oil approaches. This is especially true for oil because of its use in automobiles, trucks, airplanes, etc. Also, oil is considerably less abundant in nature than natural gas.
The rapid industrialization and improvement in living standards of China and India are contributing significantly to the increase in demand for oil and natural gas. Also, the one-time backward countries of the middle east are advancing out of the "undeveloped" ranks fast and are using more and more of their own oil.
Conventional oil-producing company stocks are a good investment.....for the long haul! As a hedge, the oil and energy investor may want to consider alternative energy company stocks although caution is advised. With the heavy interest in alternative energy, this sector is somewhat reminiscent of the Dot.com boom and bust of a few years ago. Many of the alternative energy stocks are already overpriced. You can get burned pretty bad if you make the wrong decisions.
The recent decline in the overall stock market affected some oil stocks negatively. However, the worst is hopefully over and oil company stocks look like promising investments. Especially, with the oil price exceeding $120 per barrel and continuing to rise.
For a projection on how high oil & gas prices will rise, see Oil & Gas Prices.
Many of the major oil companies stocks are under-priced and should be relatively safe to buy. The only caveat is, if gasoline prices rise too rapidly, that might put pressure on congress for some sort of punitive legislation toward the big oil companies, particularly since the Democrats have taken control of congress. However, such legislation should be limited in scope.
Twenty (20) of the large oil company stocks (examples: ExxonMobil, Petrobras, Devon, Chevron, etc) are reviewed. (Recommended: Review Petrobras for discussion of their giant field discovery off the coast of Brazil)
These companies are volatile and less likely to be affected by government punitive legislation (indeed, punitive legislation toward the major oil companies may, by default, reward the efforts of small independent oil companies!), and many small oil company stocks may offer great rewards in a rising oil price environment.
Ten (10) of the small oil company stocks (Frontier Oil, Vaalco, EPL, UPL, Eden, etc) are reviewed.
Use due diligence since some of the smaller oil companies are more speculative in nature.
For convenience, oilfield service companies, oil drilling companies, oil tanker companies, & oil refinery companies are lumped into this category. There are some great opportunities in this area but you need careful research. For example, some stocks, e.g., the oil tanker stocks, seem like incredible bargains but my research indicates they seldom move up the way we think they should. They always appear to be bargains. A very peculiar stock group! Has their time come?
Eight (8) of the oilfield services company stocks (Halliburton, Schlumberger, Transocean, Baker Hughes, etc) are reviewed.
The alternative energy stock companies require the most agility in your trading. For example, early investors (speculators) in the "green pill" company (I don't know the company's name) probably made big bucks quickly due to the TV publicity, but later investors are going to be left in the lurch as word gets out that the green pills are nothing but moth balls and have no affect on gasoline mileage.
There are some good opportunities in the alternative energy company stock sector and some real scams. I would advise trading lightly. A knowledgeable broker's advice should be helpful with this group.
Nineteen (19) of the alternative energy company stocks (Archer Daniels Midland, First Solar, Sasol, etc) are reviewed.
The alternative energy stocks remind me of the Dot.com boom and crash of a few years ago. I learned some very painful lessons in that crash! But there are opportunities in the alternative energy group if you can pinpoint the right stock.
Space does not permit an extensive list of oil & energy company stock term definitions. However, for the person new to oil stock investing, a few of these oil stock definitions are in order:
1. Stocks (Common Stocks). A share of ownership in a company. One share is the smallest share of ownership you can have. A share of stock normally gives you the right to vote for the company's board of directors. It also gives you the right to receive a dividend if the company distributes dividends from earnings. As an individual stockholder, you cannot be held liable if the company goes bankrupt or loses a lawsuit.
2. Preferred Stock. Preferred stock have one big advantage over common share - the first right to dividends. They get paid first and then the common stock holders get paid. However, the preferred stock dividend usually has a set or maximum rate so, if the company really makes big money, the common stock holder's share can be higher. Also, preferred stock holders often do not have the right to vote.
3. Bonds. Bonds are credit instruments issued by companies and government agencies. If you are a common stockholder of a company, you are a part owner of the company. If you hold bonds, you have, in effect, loaned the issuing organization money. You are a creditor but don't hold any ownership rights.
Bonds usually pay lower interest than the dividend rates of common stock and preferred stock. However, the bonds are much safer than the stocks. For example, in the event a company should go bankrupt, the bond holder will be paid back completely before stock holders get anything.
Happy trading!
1. Bakken Formation Oil. Whoever thought there could be a giant oil field in North Dakota? Estimates run from a few billion barrels to 500 billion barrels. How much is recoverable is the big question!
2. Oil & Gas Prices. There is no good news about oil and gasoline prices. They are going higher!
Oil companies stocks are divided into four categories - large oil companies, small oil companies, oilfield services companies, and alternative energy companies. The large oil company stocks and the oilfield services stocks are the safer investments. The speculative nature of investing in small oil company stocks and alternative energy stocks is noted.
Additional Web Sites
Oil & Energy Crisis - Peak Oil is on the Way
Global Warming, Al Gore, & Global Warming Effects
Germany in World War 2 - The German Side of World War 2
Disclaimer
This web site, titled Oil & Energy Company Stocks and the information included herein, is intended to provide information only and should not be construed as investment advice. The information provided is meant to broaden your knowledge and enable you to make better investment decisions within your portfolio.
Sometimes I give an opinion on the quality of an investment. This information is based solely on my own investment goals and investment needs and might not reflect your goals and needs and might not be an appropriate investment for your portfolio.
Please consult with your financial manager/consultant/accountant before actually purchasing any of the investments discussed herein.
e-mail me @ vanc13@cox.net
Last updated: 05/07/08