Drilling for oil stocks
Posted
Oct 15 2007, 02:23 PM
by
Matt Koppenheffer
For the first time today, oil broke above $85 per barrel, partly due to the threat of yet more violence in the Middle East. Now I'm not going to argue that $85 per barrel is a catastrophic increase over, say, $80 per barrel -- though 6% is nothing to sneeze at -- but it's just stacking onto the incredible rise of crude oil over the past few years. According to nominal oil price data from the Department of Energy, a price of $85 would mean that crude oil is up an amazing 393%, or roughly 17% per year, since 1997.
As investors, we can look at this from the perspective of how much the continued rise will hurt the bottom line for a broad range of companies like Wal-Mart, JB Hunt, and Southwest Airlines.
On the other hand, we can also spend our time looking at the companies that are expected to continue to benefit from the amazing surge in oil prices. To get some ideas, I tapped the CAPS community and looked at a few different sub-segments of the oil industry.
Here are a few of the five star stocks that I came up with:
- PetroChina. Warren Buffett may be a seller of this integrated oil and gas player right now, but there have been more than enough buyers to make up for it. CAPS All-Star ZachGruver said, "China, Oil, and a low P/E? Oil is hitting new highs while China is on an absolute tear."
- Schlumberger. This oilfield services company helps major petro companies stalk and access new oil. On CAPS, Radioman101 asserts that "new oil reserves have to be found and all the players will be coming to [Schlumberger] to help them find it."
- Devon Energy. Though the big boys often steal the limelight, we don't want to forget the independent oil and gas players like Devon. Over the summer, CAPS All-Star tarig called Devon "the most underpriced of all of the large independent E&P producers."
While these may be some of the top companies that will likely benefit from the price of crude, they barely scratch the surface when it comes to the oil and gas industry. If the three I mentioned above don't catch your fancy, check out some of the oil-related tags on CAPS for easy access to more options.
(Full disclosure: I do not have a financial position in any of the companies mentioned.)
