Oil For Interim Dividend & Mid Term Profit?
Oil as an investment has definitely seen better days in 2023.
Crude oil peaked at $83.26 on 12 Apr 2023 and has not revisited it since.
As per 04 Jun 2023 OPEC+ meeting, Saudi Arabia has unilaterally added another 1 million bpd cut to its already agreed 8 million bpd reduction, that remains enforced until end 2024.
With the additional cut implemented since 01 July 2023, oil price still did not rise correspondingly; defying the principal of supply & demand and dashing the intentions of Saudi Arabia.
On Mon, 3 July, Saudi Arabia said it would extend the “self-imposed” 1 million bpd production cut for another month to August.
In a “surprise” turn of event, Russia also announced a 500,000 bpd decline in exports, commencing in August, 2023.
Did the news trigger a rise in oil price?
Based on personal observation, crude oil price has been trading within a very tight band of $71 and $73, this week.
To be able to reach the upper price range, oil needs to break through the $75 resistance level (see above).
However, with global economies still facing “inflationary” pressure, it should be a while before oil demand picks up again.
Oil As Investment?
It could be a lucrative strategy for mid to long term profit investment.
In the interim, enjoy the issued dividend.
Oil carries inherent volatility “risks” [which US stock isn’t?] and is subjected to many external factors:
Supply and demand.
Geopolitics.
Environmental regulations.
Technological innovations.
Oil as investment is not one-dimensional. It consists of a diverse range of oil & oil-related companies. Broadly, the types of oil stocks available are:
Integrated majors.
independent producers.
Refiners.
Pipeline operators.
Royalty trusts.
Each type of oil stock is vital and constitute a part of the total oil supply chain.
Mid to Long term strategy is to buy now while price is still relatively weak.
While holding, enjoy the dividend that could be “re-invested” or “saved accumulatively” for other stock purchase.
When world economies recover and oil demand returns, oil stock price will rise again.
Notable Oil Companies:
Although there are many oil companies out there, below three are worth a mention:
The largest oil company in the world.
It has an attractive dividend yield of 3.54%.
It has a long history of paying dividends and increasing them every year.
Lastly, it also has a diversified portfolio of upstream, downstream, and chemical businesses, as well as a strong balance sheet and cash flow.
(2) $Chevron(CVX)$
A major oil company in its own rights.
It has a long history of paying dividends and a dividend yield of 3.95%.
Chevron has a low-cost production base, a robust pipeline of growth projects, and a disciplined capital allocation strategy.
It also has exposure to the fast-growing liquefied natural gas (LNG) market and renewable energy sources.
It is a multinational petroleum and natural gas exploration and production company.
The company has operations in the (a) US, (b) Middle East, (c) Latin America and (d) Africa.
It is one of the largest oil producers in Texas and operates in the Permian Basin, which is one of the largest oil fields in the world.
Its dividend yield of 1.25% makes it an attractive proposition.
Did I mention too that Mr Warren Buffet via $Berkshire Hathaway(BRK.A)$ has increased its stake in the company to >25% (see below).
Do you think oil price will return to the $80 and above pricing in mid to long term?
Do you think oil remains an attractive investment option?
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Earnings per share grew by an impressive 73.28% last year.
OXY's earnings per share growth has been very strong based on the last 5 years of measurement. eps grew at an average annual rate of 59.63% .
Looking back at last year, OXY's revenue growth was very strong. Revenue grew by 22.27%.
The average revenue growth over the last 5 years has been 23.79 %. This is a very strong growth!
Based on the forecast for the next 5 years, OXY's revenues are expected to decline. Revenues will decrease by an average of -8.49% per year.
OXY expects a very negative growth in earnings per share. EPS will decline by -15.10% per year over the next 5 years.
When comparing the EPS growth rates of the last few years with the growth rates of the next 5 years, we see that the growth rates are declining.
Revenue growth is declining: growth in the next 5 years will be lower than in the past years.
Earnings per share grew by an impressive 73.28% last year.
OXY's earnings per share growth has been very strong based on the last 5 years of measurement. eps grew at an average annual rate of 59.63% .
Looking back at last year, OXY's revenue growth was very strong. Revenue grew by 22.27%.
The average revenue growth over the last 5 years has been 23.79 %. This is a very strong growth!
Based on the forecast for the next 5 years, OXY's revenues are expected to decline. Revenues will decrease by an average of -8.49% per year.
OXY expects a very negative growth in earnings per share. EPS will decline by -15.10% per year over the next 5 years.
When comparing the EPS growth rates of the last few years with the growth rates of the next 5 years, we see that the growth rates are declining.
Revenue growth is declining: growth in the next 5 years will be lower than in the past years.
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The Saudis are running their own oil buyback program to desperately raise oil prices.
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Great ariticle, would you like to share it?
Great ariticle, would you like to share it?
Great article I wanted to shate
There's difference between Oil/Crude Production and Petroleum consumption. USA is still Big Petro consumption country that boasted 20.28m b/d in 2022, the Crude Oil only accounts for much less of it.
USA Net Imports Crude Oil and Net Exports Petro Products and also draws Inventory (Bad Boys in D.C. made us do just that). Rig Counts have reduced from 779 to 682 so far this year, while hard working oil companies still saw Crude production increased from 12.1m bpd went up to 12.4m, to 12.2m and back to 12.3m, and that's simply EIA data shows on every Wednesday, actual Field Production is little bit higher.
The Friday PUT Porker's gotta be going NUTs. They PROBABLY doubled DOWN yesterday.