The excess supply glut in oil that began in June will eventually end. Saudi Arabia and Russia will want higher profitability, easily achievable through a production cut.
Predicting when oil prices will go up again is impossible. Investors only have valuation discounts to consider to compensate for the unknown future. BP p.l.c. (NYSE: BP) is a compelling energy play. The integrated oil and gas firm is deeply discounted that its PEG is under one-half. The stock wiped out its 52-week high, a rally powered by the company’s strong quarterly earnings report. BP shares pay a dividend yielding around 6%.
Exxon Mobil (NYSE: XOM) trades with a dividend yielding 4.13%. The stock fluctuated throughout the year but the company is building a business that embraces renewable energy in the extraction of oil. It plans to use wind and solar to produce crude. This may sound gimmicky. Still, it is good PR at a time when “dirty energy” is out of favor.
ConocoPhillips (NYSE: COP) offers a lower dividend yield of below 2%. The firm is shedding its U.K. assets. On Nov. 1, it closed the sale of Barnett Assets for around $230 million. A leaner firm that has an improving balance sheet will help set a bottom for the stock price.
Disclosure: I own shares of BP.
