You want to own the oils. I can't stop you. I am helpless in the face of your love for crude, especially since it has now gone full circle from the ridiculous minus $37 to the plus $36, the highest price since March.
I have said endlessly that there are only a handful of oils I would own and each time the list is greeted by glossed over eyes because I haven't explained why these have captured my fancy. Each one has a particular attribute or attributes that has brought it to my attention.
At $36, a total breakout, you need to learn these names so you can 1. Invest in them at will, and 2. Stop bothering me about a group that I think younger investors have turned on and will not go back because they despise the despoiling of the Earth and, now that coal companies have all but disappeared, this is the logical group to be scorned.
First, many of you are drawn to their dividends. I say, don't be stupid. There is only one high yield oil I trust, Chevron (CVX) . If you go over that last quarter you will see, over and over again, Mike Wirth, the CEO, talk about preservation of dividend and he has the cash flow to back up that 5.4% yield. I am so impressed with Wirth and his decision to walk away from a fight with Occidental (OXY) to buy Anadarko, a fight, he could easily won as Chevron is the bigger company. To the victor belonged the trashed dividend and trashed balance sheet.
The hefty dividends you see from the master limited partnerships? Many are illusory: there's too much pipe, not enough takers. The other large company dividends? After Royal Dutch (RDS.B) slashed its distribution, but not before many years of assurance that it was fine, count me out of all the other majors.
Next up? You want great assets, discipline and selflessness as there's been severe payday cuts? You buy Pioneer (PXD) run by the esteemed Scott Sheffield, the dean of the patch. They have both the lowest cost -- $500 per acre in the fantastic Midland basin portion of the Permian, with 10 billion barrels of oil equivalent. Get this: low cost? How about $4.80 a barrel. That's almost profitable at negative $37. Kidding, but you get the picture. It shows you how impoverished all the oil companies are or this one would have been snapped up by a major a long time ago.
Drawn to growth? I will give you two: EOG Resources (EOG) and Diamondback Energy (FANG) . Both have throttled back costs immensely but not destroyed production levels. EOG had taken its rig count down from 36 to 8 rigs and it intends to go down to 6 rigs for the rest of 2020. I think this quote from a recent Credit Suisse report sums things up: "We view EOG as a bellwether in the Exploration and Production sector; it has long embraced the financial discipline/returns-focused approach that investors are now demanding from the rest of the industry." It's very rare to get EOG this cheap as some are dismayed that it has throttled spending too far. I say it will do better than its peers in terms of capital preservation and still give you above average growth.
The Street was largely disappointed by the production that Diamondback Energy delivered. I say everyone is entitled to a mistake. It should surprise to the positive in the second half of the year, even at lower prices because it cut to the bone while maintaining its 3% dividend. My bet is that despite its big exploration cut it maintained its optionality and will surprise this quarter.
Finally, let me give you my personal favorite: Parsley Energy (PE) . This $4 billion company not only hit its earnings targets but also recently declared that it can raise production to meet the higher oil prices we've gotten. Parsley is deeply committed to being a responsible oil company and it has admonished its industry for not cutting flaring that generates a tremendous amount of pollution. Matt Gallagher has been on Mad Money many times to expound on his belief that many oil companies simply don't care enough about the environment.
There you have it: a big cap dividend producer, Chevron, a company with the best assets, Pioneer, two larger growth companies, one with great discipline, EOG, and the other, Diamondback, with the quickness to expand or contract production, and Parsley which made the numbers while being able to beat them if oil goes higher, which it has.
