After the oil price plummet, you may be looking to invest in the top energy stocks. I compared the recent business performance of 9 oil & gas integrated companies and 7 midstream companies, respectively. I focused my analysis on profitability and debt because those factors determine whether an energy stock will survive or even thrive in a prolonged low oil price environment.
The oil & gas integrated companies analyzed include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Suncor Energy (TSX:SU)(NYSE:SU), and the midstream companies analyzed include Kinder Morgan Inc (NYSE:KMI), Magellan Midstream Partners, L.P. (NYSE:MMP), and Enbridge Inc. Which are the safest energy stocks for long-term investing?
Safest Integrated Oil & Gas Stocks
From the integrated oil & gas stocks, Suncor Energy is a winner. It has low cost of operations, high operating margins, as well as a culture to increase dividends. Exxon Mobil and Chevron are also winners because they have relatively high operating margins and low debt levels that can only benefit them in the low oil price environment. Read More
We all know companies in the Energy sector are taking a beating due to the oil price plummet. Many energy companies pay a dividend. Yet, on one extreme some companies slashed their dividends, such as Cenovus Energy Inc (TSX:CVE)(NYSE:CVE) and on the other side of the extreme, there are some that have continued raising their dividends.
Here is the list of Energy companies that have not cut (some even raised) their dividends in the past year: Imperial Oil Limited (TSX:IMO)(NYSE:IMO), Suncor Energy Inc. (TSX:SU)(NYSE:SU), Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ), Enbridge Inc (TSX:ENB)(NYSE:ENB), TransCanada Corporation (TSX:TRP)(NYSE:TRP), Inter Pipeline Ltd (TSX:IPL), Pason Systems Inc. (TSX:PSI), and Ensign Energy Services Inc (TSX:ESI).
Berkshire Hathaway sold out of its stakes in Exxon Mobil and ConocoPhillips.
And added more shares of Suncor Energy.
Reason 1: US dollar to the Canadian dollar is at decade’s low.
Reason 2: The Canadian Dollar is correlated to the oil price.
Reason 3: Suncor Energy is a quality company priced at a value.
Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) reported its Q4 2014 moves. It sold out of its stakes in Exxon Mobil (NYSE:XOM) and ConocoPhillips (NYSE:COP). However, it added mores shares of Suncor Energy (NYSE:SU).
Some Reasons Why Mr. Buffett sold some US big oil companies but bought Suncor Energy
Reason 1: US dollar to 1 Canadian dollar is at Decade’s Low
It currently takes ~$0.80 USD to exchange for ~$1 CAD, which is at the decade’s low. That means, around this exchange rate, Berkshire Hathaway would have bought the Suncor Energy shares at a 20% discount based on the foreign exchange rate alone.
Reason 2: Canadian dollar is Correlated to the Oil Price
The oil price’s lowest points were in 2009 and the present day, which matches the low points of the Canadian dollar compared to the US dollar historically. So, there’s a correlation between the oil price and the Canadian dollar. Low oil price implies low Canadian dollar in comparison to the US dollar, and vice versa. If one believes, oil price will head higher again, then one should also believe the Canadian dollar will head higher again. Read More