Basically the title. Are o&g companies a good buy right now? Obviously prices have risen since the pricing war, but for the long term is it a solid cop?
Low overall growth, yes. But pretty high dividends with a degree of safety. So, am I safe to invest in O&G for the Long Term?
Or are there other reservations about this sector?
TLDR: Oil & Gas seem like a safe investment bc of high dividend and pretty stable movements
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To date, the situation with oil has stabilized, but personally, I, as an inexperienced investor, can not take such a risk.
Lol no. Energy sector broadly hasn't returned a dime to equity investors in like 15 years, incl divs. The world is shifting underneath, and my sector isn't innovating or adapting fast enough.
Disc: I work in O&G
dividends are about 6-8%, how is that not a strong dividend?
Looking solely at dividends to pick your investments is frightening... There's more to the total return formula than dividends and, in case it isn't obvious, the other variables can be negative (or, are, in the case of energy).
I'll leave the below screen I just pulled here, do as you please.
Innovation seems to be the problem. Shale innovation killed the industry.
Shale once figured out how to do it become a constant costs industry. Which means no economic profits. Any time things are good someone new enters the industry and drills more and price goes down. When a crisis hits people have constant costs and demand disappears and prices plummet. Can’t keep high prices for long.
Consumers have benefited a ton from oil and gas innovation. Just not barriers to entry anymore.
Basically shale innovation turned oil companies into having the same economics as airlines but far less industry concentration.
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