The combination of slowing oil demand growth in China and other key markets and surging output from US shale plays—and their implications for global spare productive capacity—has sent crude prices plummeting.
Although crude-oil prices have caught a bit of a bid over the past few days and oil-field services and upstream names have benefited from a bout of short covering, the near-term outlook suggests that crude-oil prices will remain below the elevated levels that became the norm in recent years.
Meanwhile, any moderation in production volumes associated with anticipated reductions to capital expenditures won’t show up for several quarters, especially with operators focusing development activity in their core acreage and pushing for 15 percent to 20 percent price breaks from service providers.
And with US producers able to sink high-probability new wells within a week, this shadow capacity should keep a lid on oil prices in the intermediate term, assuming OPEC maintains its output levels and no major disruptions occur in the usual hot spots.
Against this backdrop, the demand side beckons. Our favorite hedge against lower crude-oil prices–a name that we added to our Model Portfolio in January 2014–has soared by 41.6 percent since the end of the third quarter.
In this issue, we highlight our top picks in several industries that stand to benefit from extended weakness in crude-oil prices and offer exposure to other company- and industry-specific growth trends.
We also highlight an opportunity for investors to lock in high yields on securities that actually stand to benefit from potential dividend cuts in the upstream space.
These picks will work in concert with our top picks in the energy sector to deliver solid returns during a period of heightened volatility and uncertainty.
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 Dec. 31, 2019
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.