• 4 minutes Tariffs to derail $83.7 Billion Chinese Investment in West Virginia
  • 9 minutes Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 17 minutes Kaplan Says Rising Oil Prices Won't Hurt US Economy
  • 19 hours Kaplan Says Rising Oil Prices Won't Hurt US Economy
  • 3 hours Battle for Oil Port: East Libya Forces In Full Control At Ras Lanuf
  • 4 hours Saudi Arabia turns to solar
  • 14 hours Could oil demand collapse rapidly? Yup, sure could.
  • 1 hour Russia's Energy Minister says Oil Prices Balanced at $75, so Wants to Increase OPEC + Russia Oil by 1.5 mbpd
  • 8 hours Corruption On The Top: Netanyahu's Wife Charged With Misuse of Public Funds for Meals
  • 14 hours Gazprom Exports to EU Hit Record
  • 3 hours Saudi Arabia plans to physically cut off Qatar by moat, nuclear waste and military base
  • 14 hours OPEC Meeting Could End Without Decision - Irony Note Added from OPEC Children's Book
  • 19 hours China’s Plastic Waste Ban Will Leave 111 Million Tons of Trash With Nowhere To Go
  • 10 hours U.S. Withdraws From U.N. Human Rights Council
  • 12 hours What If Canada Had Wind and Not Oilsands?
  • 13 hours "The Gasoline Car Is a Car With a Future"
  • 1 day EVs Could Help Coal Demand
  • 7 hours EU Confirms Trade Retaliation Measures vs. U.S. To Take Effect on June 22
  • 13 hours Sell out now or hold on?
Martin Tillier

Martin Tillier

More Info

Trending Discussions

Why This MLP (And Others) Represents A Value Trap

After a tumultuous period for energy investors it is beginning to look as if some degree of calm and logic is returning. WTI crude oil has twice bounced off of the mid-$40s level, suggesting that a real bottom has, at least for now, been found. The obvious response of investors is to start casting around for value. Even now that the panic is over there is still plenty to be had. That doesn’t mean, though, that everything which has lost ground is worth buying.

As I have mentioned several times in the last few weeks, buying large, multinational companies, either diversified firms such as Exxon (XOM) or Chevron (CVX) or oilfield service companies like Anadarko (APC) or Halliburton (HAL), is almost guaranteed to pay off in the long term. These are firms that have vast experience of surviving through the swings of a highly volatile commodity market. A period of reduced revenue will hurt, but it won’t be fatal. There are even some smaller, riskier plays worth considering, usually when hedging policy has bought those smaller companies time. There are two areas where investors should exercise extreme caution, though.

Companies that borrowed heavily to participate in the U.S. oil boom when crude looked set above $100/barrel face an obvious debt servicing problem with oil at about half of that. Many are now operating at a loss, but even those that are making money are facing an unattractive cash flow situation. Not only are interest payments that looked reasonable…

To read the full article

Please sign up and become a premium OilPrice.com member to gain access to read the full article.

RegisterLogin

Trending Discussions





Oilprice - The No. 1 Source for Oil & Energy News