What are oil stocks?
Oil stocks are share issues of companies that explore for, develop and produce oil.
At TSI Network, we continue to advise against overindulging in oil stocks. That’s because the Resource sector (including oil) is highly volatile, and no one can accurately predict future oil prices. As well, oil companies are subject to various environmental regulations and royalties that can eat into their profits.
However, you can profit nicely over long periods by investing a reasonable portion of your portfolio in well-established or well-managed oil stocks, especially those with high-quality reserves and rising production. These companies are well-positioned to profit during periods of high oil prices, and are able to at least partly offset price declines by producing more oil.
Investors should also seek out oil company stocks that have strong balance sheets and the financial strength to take advantage of low oil prices to pick up properties and employees who might be harder to find in more prosperous times.
Junior oil stocks can be particularly risky and should only be held by aggressive investors. But you can integrate them into a well-balanced portfolio by following TSI Network and using our three-part Successful Investor strategy:
1. Invest mainly in well-established companies;
2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
3. Downplay or avoid stocks in the broker/media limelight.
Discover how to build a winning stock market portfolio in this free special report, Canadian Stock Market Basics: How to Trade Stocks and Make Good Investments in Canada, from TSI Network.
CHESAPEAKE ENERGY $27.17 (New York symbol CHK; TSINetwork Rating: Extra Risk) (405-848-8000; www.chkenergy.com; Shares outstanding: 664.0 million; Market cap: $18.1 billion; Dividend yield: 1.3%) is preparing to spin off its oil-field services division into a separate, publicly traded company. The new firm will be called Seventy Seven Energy and will trade under the SSE symbol.
Chesapeake will hand out all of …read more »
DEVON ENERGY CORP. $68.68 (New York symbol DVN; TSINetwork Rating: Speculative) (405-235-3611; www.dvn.com; Shares outstanding: 407.4 million; Market cap: $27.6 billion; Dividend yield: 1.4%) is one of the largest U.S.-based oil and natural gas explorers and producers. Its production mix is 57% gas and 43% oil.
In 2011, Devon sold all of its international and Gulf of Mexico properties, which it …read more »
BELLATRIX EXPLORATION $9.96 (Toronto symbol BXE; TSINetwork Rating: Speculative) (403-266-8670; www.bellatrixexploration.com; Shares outstanding: 171.0 million; Market cap: $1.7 billion; No dividends paid) has announced an expanded joint venture agreement with Grafton Energy Co. I Ltd. The deal should speed up the development of Bellatrix’s Cardium shale oil deposits in west-central Alberta.
Under the new deal, Grafton increased the amount it is …read more »
IMPERIAL OIL $51.60 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $44.0 billion; TSINetwork Rating: Average; Div. yield: 1.0%; www.imperialoil.ca) is selling some of its conventional oil and natural gas properties in Alberta and B.C. to Whitecap Resources. These assets produce 15,000 barrels a day, which is equal to 5.1% of the 295,000 barrels a day that Imperial produced …read more »
New technology has increased oil production from North American shale rock formations. Even so, oil prices have held up due to the improving global economy and lower output from conventional wells. However, the outlook for oil remains uncertain. The lifting of economic sanctions against Iran would increase world oil supplies and hurt prices. As well, the shale boom continues to …read more »
Growth by acquisition can be risky, as newly purchased companies may develop unforeseen problems, especially in an unsettled economy. But Pembina lowered that risk with last year’s purchase of a rival in a business where it’s already a leader. Pembina will now focus on building its own projects. Veresen aims to keep expanding by adding power plants with long-term contracts …read more »
TRANSCANADA CORP. $46.71 (Toronto symbol TRP; Shares outstanding: 707.0 million; Market cap: $33.4 billion; TSINetwork Rating: Above Average; Dividend yield: 3.9%; www.transcanada.com) now estimates that it will cost $5.4 billion U.S. to build the Keystone XL pipeline, which would pump crude from the Alberta oil sands to refineries on the U.S. Gulf Coast. That’s up from $5.3 billion U.S. TransCanada …read more »
PENN WEST PETROLEUM $9.14 (Toronto symbol PWT; Shares outstanding: 488.1 million; Market cap: $4.4 billion; TSINetwork Rating: A v e r a g e ; D i v i d e n d y i e l d : 6 . 1 % ; www.pennwest.com) is one of Canada’s largest oil and gas producers. Penn West continues to shore up …read more »
TECK RESOURCES LTD. $27 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 576.3 million; Market cap: $15.6 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.3%; TSINetwork Rating: Average; www.teck.com) will contribute $2.9 billion to the Fort Hills oil sands project (see Suncor at left). Teck mainly produces coal, copper and zinc, so Fort Hills will help diversify its operations. …read more »
PEYTO EXPLORATION & DEVELOPMENT CORP. $28.10 (Toronto symbol PEY; Shares outstanding: 148.5 million; Market cap: $4.2 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.4%; www.peyto.com) produces and explores for oil and natural gas in Alberta. Its average daily production of 58,145 barrels of oil equivalent is 89% gas and 11% oil. In the three months ended June 30, 2013, the …read more »