Oil prices will stay lower for longer: We reiterated this outlook in the July 18 issue of Energy & Income Advisor and have maintained this forecast since fall 2014, despite many commentators calling for a V-shaped recovery in prices.
Earlier this year, far too many investors eager to load up on what they regarded as emerging values. And the short-lived relief rally in oil prices and energy-related equities earlier this year gave them confidence that the market had bottomed and emboldened them to plow money into ostensibly bargain-priced stocks.
Although many energy stocks look inexpensive relative to their recent price history, industry fundamentals have changed dramatically; a cheap stock can always get cheaper.
Investors should expect an uptick in bankruptcies among highly leveraged exploration and production companies with marginal assets. For example, investors betting that a takeover offer will rescue their underwater positions in SandRidge Energy (NYSE: SD) likely will be disappointed.
And even shares of best-in-class energy companies will suffer further downside if West Texas Intermediate (WTI) crude oil drops to less than $40 per barrel during the upcoming refinery turnaround season. This downside likely would extend to high-quality midstream names and the major integrated oil companies.
But real opportunities lurk amid all this pain.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Jul. 27, 2022