The lack of energy price stability and weak demand will continue to ravage the sector. Schlumberger (NYSE:SLB) booked big losses and its non-GAAP earnings suggest the dividend is at risk. Although there is some hope with oil prices holding the $40 level, the March drop to ~$10 is fresh on investor memory.
Investors need to forecast energy demand in the near-term. The stay-at-home trends will hurt oil demand as the pandemic risks worsen. Winter also brings with it the flu season (influenza). People will tend to stay warm inside, increasing the risks of spreading the virus.
The vaccine is the ultimate outlier that may save energy markets. If brought to market by later this year or early next year, companies that stay solvent will survive. Look at BP (NYSE:BP), Exxon (NYSE:XOM), and ConocoPhillips (NYSE:COP) for a possible entry point.
These firms trade at multi-year lows and still pay a dividend. They are also likely to thrive as weaker firms declare bankruptcy and shut output. So, as oil supply falls and demand stabilizes, oil prices will strengthen. The vertically integrated oil firms will report profits again by the middle of next year.
Disclosure: the author owns BP shares.
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