• 5 mins Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 hours Syrian Rebels Relinquish Control Of Major Gas Field
  • 3 hours Schlumberger Warns Of Moderating Investment In North America
  • 4 hours Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 5 hours Energy Regulators Look To Guard Grid From Cyberattacks
  • 7 hours Mexico Says OPEC Has Not Approached It For Deal Extension
  • 8 hours New Video Game Targets Oil Infrastructure
  • 10 hours Shell Restarts Bonny Light Exports
  • 11 hours Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 17 hours Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 22 hours British Utility Companies Brace For Major Reforms
  • 1 day Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 1 day Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 1 day Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 1 day OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 1 day London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 1 day Rosneft Signs $400M Deal With Kurdistan
  • 1 day Kinder Morgan Warns About Trans Mountain Delays
  • 2 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 2 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 2 days Russia, Saudis Team Up To Boost Fracking Tech
  • 2 days Conflicting News Spurs Doubt On Aramco IPO
  • 2 days Exxon Starts Production At New Refinery In Texas
  • 2 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 3 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 3 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 3 days China To Take 5% Of Rosneft’s Output In New Deal
  • 3 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 3 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 3 days VW Fails To Secure Critical Commodity For EVs
  • 3 days Enbridge Pipeline Expansion Finally Approved
  • 3 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 3 days OPEC Oil Deal Compliance Falls To 86%
  • 4 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 4 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 4 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 4 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 4 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 4 days Aramco Says No Plans To Shelve IPO
  • 7 days Trump Passes Iran Nuclear Deal Back to Congress
Alt Text

China Takes Aim At The Petrodollar

In a potentially disrupting move…

Alt Text

Oil Prices Rise Amid Falling U.S. Rig Count

Oil prices inched higher on…

Alt Text

Oil Fundamentals Overturn Geopolitical Risk

Geopolitical risk from Iraq and…

Stay on the Energy Train, Even if Oil Prices Derail

Stay on the Energy Train, Even if Oil Prices Derail

Energy is in a boom, but that doesn’t necessarily mean that oil is booming, at least in terms of price. There are several factors that lead me to conclude that, while NYMEX crude is unlikely to collapse, upward momentum will be hard to come by over the next couple of years. The shale revolution and improving technology in deep water drilling are increasing supply while reducing costs, and at the same time “alternative” energy is becoming increasingly mainstream, practical and affordable. Even in the short term, the oil market’s collective shrug of the shoulders as problems persist in Syria and the Ukraine indicates that sellers have the upper hand. A drop back to the $80/Barrel support for NYMEX crude looks far more likely in the near term than a break through the resistance at $120.

That bearish stance on oil prices, however, doesn’t mean that I am bearish on energy stocks. Established, big oil companies such as Exxon Mobil (XOM) and Chevron (CVX) will quite possibly remain capped and continue to underperform, but there are several opportunities, both in alternatives and in smaller exploration and production companies that investors can sink their teeth into.

Alternative energy stocks have had a great year, but if they continue to fulfill potential it may be that, in the immortal words of Bachman Turner Overdrive, “You ain’t seen nothing yet.” The industry is beginning to wean itself off of dependency on government support and winners and losers are beginning to emerge.

Call me brave (or stupid if you prefer), but despite the volatility of the last couple of weeks, I’m still a believer in fuel cell stocks, for example. Plug (PLUG), Ballard (BLDP), FuelCell (FCEL) and all are a dramatic example of one of the first things I learned about markets as a young, interbank forex broker back in the 1980s. Traders are, by nature, over reactors; when you spend all day staring at screens and waiting for news that is almost inevitable. When PLUG announced their contract with WalMart (WMT) every stock in the sector looked like the next Google (GOOG); just a few days later and they looked like pets.com.

The reality, of course, is that they are neither. PLUG in particular is a company that is only now beginning to focus where they should, on supplying its GenDrive fuel cell units, then contracting to service them and supply fuel. Customers will pay a premium for even a slight shade of green now and in the future, and hydrogen fueled power is about as green as it gets. They have a future and a clear path to sustained profitability, so while the move up was too far too soon, anywhere around $6 will probably look mighty cheap in a couple of years.

Plug Power

PLUG is extremely risky, however, and recent volatility makes this not for the faint of heart so averaging in over the next few months may be the best strategy. More conservative investors don’t have to miss out on the alt energy boom, though. Something more mainstream, like First Solar (FSLR) still looks value, despite today’s jump on improved outlook at a forward P/E of around 18.

As I said, though, just because I am not bullish on NYMEX crude, that doesn’t mean that there aren’t oil stocks I like. Cobalt International Energy (CIE) is one.

Coabalt
 
They have recently shown one very desirable attribute for an exploration company…luck. CIE has a 42% stake in a deepwater field off the coast of Angola in partnership with BP (BP) among others, and the first four exploratory wells revealed significant oil reserves. That is significantly lucky when discovery averages 50%. Commercial viability of the wells is yet to be proven, but after a series of disappointments in other areas the stock is depressed enough to make CIE a relatively low risk bet.

Energy investing has changed beyond recognition in the last few years. Shale extraction, alternatives that are no longer the stuff only of tree huggers dreams and the fact that people around the globe continue to procreate have all contributed to a booming market. Those that scream “BUBBLE!” with every move up are probably the same ones that said that the NASDAQ Composite above 1000 in 1995 was a danger sign. An awful lot of money was made from that point to the peak of 5000 five years later, and there is still plenty to be made in energy stocks too, even if the price of oil stagnates.

By Martin Tillier of Oilprice.com




Back to homepage


Leave a comment

Leave a comment




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