It's earnings time again in the energy world, a time I normally ignore as a 'known known' of financial information and corporate self-promotion. But this quarter, I detect an important change in the attitudes – and forward plans – of some of the biggest independent U.S. oil companies. And those changes signal we're entering another stage of the oil bust cycle, and tell us a great deal more about how we should be positioning ourselves in the sector.
It has seemed like an interminable time that oil has been depressed – even though we know quite well that oil prices are ultimately unsustainable anywhere below $80 a barrel in the long-term. It has always been the pace and timing of the 'creative destruction' that must happen in the oil world that tells us where and when to invest in oil stocks. We obviously don't want to buy companies that aren't going to survive the bust; but we also don't want the survivors today if they're due to experience another two years or more of contraction first.
My strategy has been consistent for the past several months – buy the likely survivors at value, expect further chances to buy more (and don't be afraid to) and don't expect oil or the stocks to get really constructive until the 2nd half of 2016.
Now 3rd quarter reports, particularly from Anadarko Petroleum (APC) and Hess (HES), two of my most likely survivor candidates, confirms we've been on precisely the right track.
Think back on the conference…