2014 has been a busy year for energy investors, with lots of ups and downs. With a long list of unexpected geopolitical twists, there was never a dull moment: the deepfreeze in the U.S. causing natural gas prices to spike, Russia’s annexation of Crimea and the possibility of natural gas supply disruptions to Europe, the rise of ISIS and the splintering of Iraq, and more.
At the beginning of the year, no one would have predicted these events.
But the most surprising development in 2014 by far was the crash in oil prices.
This column often highlights major energy opportunities with new technologies, exciting offshore plays, and below-the-radar shale basins that nobody is talking about. But in an oil market that is looking increasingly likely to stay low for a while, companies are going to be much more conservative moving forward, at least in the short term. That limits the potential for homeruns.
But it also opens up new opportunities.
Upstream? Not Now
And that means staying away from small and mid-sized companies in upstream oil and gas. The largest oil companies can withstand an extended period of low prices due to their size, breadth, and diversity. Companies like ExxonMobil (NYSE:XOM) have integrated their operations so that they also earn when prices drop, due to their large refining assets. ExxonMobil’s share price, while bobbing up and down over the course of 2014, has barely budged from where it was…