10 Best Oil and Gas Stocks for - Top Stocks - TheStreet Ratings
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That slump came despite OPEC's best efforts since producing nations have achieved fairly good compliance on their planned output cuts. PSX , and ConocoPhillips NYSE: COP , which should all do well in the current oil market. The total active rigs, according to Baker Hughes, has doubled since its low back in May of DistributionNOW -- or Now Inc. The past several quarters have been rather tough ones for anyone in this business, but DistriubtionNOW's management has performed admirably by right-sizing the business by significantly reducing headcount and closing or consolidating 99 facilities.
These have aided in preserving capital and allowed the company to remain free cash flow positive throughout the entire downturn.
Now that the North American market is picking back up again, we can reasonably estimate that it will have a profound impact on the bottom line.
After all, the U. It's also worth mentioning that DistributionNOW has completed four acquisitions in the U. These acquisitions and several competing companies going out of business have led to DistributionNOW gaining market share.
While the company's financials aren't looking that great lately -- distribution is a rather low margin business even when times are good -- it has more cash on hand than outstanding debt. Also, it has remained free cash flow positive despite the net income losses for eight straight quarters. Today, shares are trading at 0. By any measure, that is a cheap price to pay, especially when the industry is still emerging from a trough. Whenever I research energy companies -- or any stock with exposure to commodity prices -- I like to find ones which have either minimal exposure to commodity prices, or other factors in place that offset that risk.
As the past two-plus years have demonstrated, low oil and natural gas prices can destroy massive amounts of investor value. My search for companies well-positioned for almost any energy price environment often brings me back to Phillips This is in part because, while its refining segment is affected to some measure by oil prices, the company has demonstrated that it can make money in refining even when competitors struggle. This is in no small part due to the highly advanced capabilities of its refineries that give the company a lot of flexibility to process different kinds of crude oils that other refiners can't handle.
That can mean lower input costs. But that's only part of what I like about Phillips Its extensive petrochemical and midstream segments are faster-growing than refining, and management can allocate capital for better returns in those businesses.
This has helped Phillips 66 consistently generate some of the best returns on invested capital of any refiner:. PSX Return on Invested Capital TTM data by YCharts. While the deal will shrink the size of the company, it also makes it a better one overall.
That improvement has the potential to create tremendous value for investors in the future, making April a great month to dive in. These improvements set the company up to deliver healthy cash flow in the current oil market environment, which it intends to allocate toward a variety of priorities and create value for investors.
The company expects this formula to fuel double-digit annual returns for shareholders even if oil doesn't budge, with significant upside if crude prices improve. Jason Hall owns shares of Phillips Matt DiLallo owns shares of ConocoPhillips and Phillips Tyler Crowe owns shares of NOW. The Motley Fool owns shares of and recommends NOW. The Motley Fool has a disclosure policy. Matthew is a Senior Energy and Materials Specialist with The Motley Fool. He graduated from the Liberty University with a degree in Biblical Studies and a Masters of Business Administration.
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Smart Energy Investing When Oil Is Cheap
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