A mélange of topics to be covered this week in the column, I cannot pick one that is more valuable than the other, so I’ll try to touch upon them all – forgive the necessary superficial treatment:
We’ve been frankly awesome in some macro predictions about oil and oil stocks in the last several months and are really beginning to reap the rewards of those insights. We believed we’d see upwards of $75 oil this year, a prediction we’re already seeing in Brent oil in April, all while the bank analysts have only slowly raised targets from well under $55 – not just for this year, but NEXT year as well:
(Click to enlarge)
We’ve looked at the massive disconnect between oil prices and the prices of underlying oil stocks and have sent out a few buy signals for this tremendous opportunity – several of our favorites have registered massive gains in the last two weeks after that call.
Now quarterly reports are starting to roll in, on Thursday morning from Total (TOT), Shell (RDS.A) and Conoco-Philips (COP). What we can say from these few is that the advice we gave towards looking at the oil majors has been borne out again from these few quarterlies – Shareholders are no longer looking to reward a mere increase in production but need it to be in line with cash flow. Outspend your incoming cash flow on Capex and you will get punished; Exxon’s performance has been the most obvious proof of this…