Oil sector share tips: bargains and dividends after the crash

TL;DR

Oil prices have experienced significant volatility due to the coronavirus outbreak and a decline in global growth, but a potential resolution between major producers could lead to a sustained recovery.

Transcript

with me today I have Sam wire oil and gas analyst at SP angel Sam the Old Market is been hugely volatile and industry share prices have been swinging wildly so naturally we've got lots of questions for you the oil price crashed about 60 percent during the corona virus outbreak but it was falling before the pandemic took hold and could you explain w... Read More

Key Insights

• 🌐 The decline in oil prices was already happening before the coronavirus outbreak due to oversupply concerns and weakening global growth.
• 🛢️ The recent bounce in prices is attributed to potential agreements between major oil producers to reduce oversupply.
• 🛟 BP and Shell are likely to continue paying dividends due to their capital availability and their focus on preserving income growth for shareholders.
• 💪 Energy, Rok Rose Energy, and Union Jack Oil are potential winners in the crisis due to their strong production profiles and undervalued status.
• ◽ The smaller end of the market, including explorers, has been hit hard by the crisis due to limited capital availability and volatile commodity pricing.
• 👋 Energy companies with a stable and positive outlook, such as Rok Rose Energy and Union Jack Oil, represent good value in the current market.

Questions & Answers

Q: Why did oil prices crash even before the coronavirus outbreak?

The decline in oil prices was already underway due to oversupply concerns and weakening global growth. The outbreak exacerbated the situation.

Q: What could lead to a sustained recovery in oil prices?

If there is a resolution between major oil producers, such as Saudi Arabia and Russia, to reduce oversupply, it would support long-term stability in oil prices.

Q: Will BP and Shell stop paying dividends during this crisis?

Despite the uncertain times, both BP and Shell are expected to preserve their dividends. They have sufficient capital availability to continue paying dividends for 2020 and 2021.

Q: Are BP and Shell attractive investments at current levels?

Yes, they are considered good value due to their geographic and geological diversification and their ability to defer or reduce capital payments during this crisis.

Q: Are there any mid and large cap producers and explorers that stand out as potential winners in this crisis?

Energy, an oil and gas company targeting first gas from its Israeli field in 2021, has shown a strong production profile and recent acquisitions. Rok Rose Energy and Union Jack Oil are also undervalued and could be good buys.

Summary & Key Takeaways

• The oil price was already falling before the pandemic due to concerns of oversupply and declining global growth.

• The recent bounce in prices is attributed to potential agreements between the US, Saudi Arabia, and Russia to scale back oversupply.

• BP and Shell, two major oil companies, are likely to preserve their dividends despite the current market uncertainty.