Who is buying stock in oil companies with these low prices?

8 Replies

And what do you think of these oil companies and their low stock prices?

Dylan, like Real Estate. Due Diligence is key and "factoring" in appreciation is usually a mistake.

Hence, I'm mainly look at the oil names for the passive income (from the now impressive yields). The key is to form a hypothesis on whether the dividend/distribution will be cut and how much if so. With yields as high as they now are; in theory many of them can be cut in half and still produce a solid return.

I've began building a position earlier this month and will layer in slowly over the next few months if oil continues lower (I'm buying down to $40 oil if it gets there) with view of holding 3-5 years  and trimming on any aggressive pops.

Interesting fact - From the data I've seen, the inflation adjusted average price of oil from 1946 to now is just shy of $41, surprising! 

Hi Dylan,

I am buying next week.

I've been investing in oil since 2011 but as a limited partner in direct participation programs, not stocks. In these investments I am investing in the underlying assets (the oil wells, leases, etc.) not the companies producing the oil.

These investments allow me to participate directly in the income, expenses and tax benefits (which are substantial). This is much different than owning stock in an oil company which makes money, pays expenses, and taxes, then gives whatever is leftover to it's stockholders...and you end up paying taxes on the distributions/gains you receive.

Also, the income from direct participation programs is passive income, not portfolio income like with stocks. Generallly, passive income is taxed at a lower tax rate than portfolio income. Also, if you own investment real estate, your passive activity losses from real estate can be used against your passive income from oil, which means you keep more money in YOUR pocket and just increased your ROI.

The reason I am investing more in direct participation oil is because one partnership I am in will be buying up distressed wells and leases that current owners cannot afford to keep because they are over-leveraged - just like what happens when real estate crashes, everything goes on sale!!

We will be buying low, holding and riding the market back up as prices recover, while watching our monthly cashflow increase as prices increase, as well as the value of our assets appreciate, potentially allowing us to exit for a gain in the future.

Yes, things will be choppy for the foreseeable future, perhaps indefinitely but we do not invest with leverage so we can just buy and hold until it makes sense to produce and/or exit.

Best,

jc 

instead of buying them outright look at writing (selling) puts.  But I'd wait for the next spike in volatility.  

Think oil network more than oil company.  I invest in master partnerships with pipeline operators and transporters.  Hedges price for me personally.

I was thinking about buying Exxon and some of the larger names with high dividend yield payouts. I typically buy individual stocks in my roth 401k for income. I would speculate if oil continues to decline, you will see some sort of industry consolidation through M&A.

@Jordan Thibodeau   I like EXXI because of the potential it has. If you look you also can see SDLR

@Jordan Thibodeau   Sorry. SDRL has a lot of potential even though they just got rid of their dividend.  The oil drilling industry typically increased before crude in general so I see them as a long term play or someone else in the oil drilling industry

@Dylan Burnett   Cool. Thanks for tip. It looks like SDRL cut it's dividend. I wonder if EXXI will follow suit, we should know by the earnings call on 2/4.

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