Fortune favours the brave and investors who were boldenough to buy oil stocks at recent lows shouldhave made a pretty penny. However, some companies have benefitted more than others. Can these three stocks help you play the next stage of the oil recovery?
Genel Energy
Pricier oil has done little to help troubledGenel Energy (LSE: GENL). While abarrel of Brent crude leapt from $27 to $44 from mid-January, an increase of more than 60%, Genels share price is actually down 15% to around 105p over the same period. Genelclearlyhas its own challenges, copingwith haphazard payments from the Kurdistan Regional Government.
Genel has been bogged down in the long-runningrevenue-sharing dispute between the KRGand Iraqs federal government. The money has started to flow recently, the latest payment totalling $13.08m for the Taq Taq field in March, a month when Genelalso made average gross oil sales of75,300 barrels of oil per day. Unfortunately, itis still owed more than $400m for previous production. Risk-on investors must understand that Genelisnt a play on the oil price but something even more volatile, Iraqi politics.
Petrofac
The Middle East is also a key region for oil services specialistPetrofac(LSE: PFC)but it operates in less volatile areas and therefore benefits from cheaper local production costs, while avoiding most of theshooting. On 27 January, with the stock trading at 745p, I wrote that Petrofaccould be a relatively safe way to play the oil price fightback and hey presto, today it trades at 900p, a rise of just over 20%. This is solid but not spectacular, given that ariskierplay such as explorer Premier Oil is up 180% over the same period.
Petrofacisnt rock solid. Last year costs on itsLaggan-Tormore gas project in the Shetlands overran by hundreds of millions of dollars, and the termination of the shipyard contract toconstructitsJSD6000 deepwater multi-purpose vessel was another blow. The future looks brighter as these issues recede and the order book remains health, although the 5.2% yield is perhaps the bigger attraction.
Weir Group
Investors in Glasgow-based pump makerWeir Group(LSE: WEIR)have endureda rough ride, with the shares down55% over twoyears due tofalling demand for its mining, oil and gas end markets, particularly US shale. Even its supposedly resilient aftersales market was hit. In March, I said the tide was turning forWeir and, hey prestoagain, it has enjoyed smoother sailing lately, withthe share up a breezy since13% to todays 1,123p.
Weir needsmore than a higher oil price, it needs itscustomers to start investing again. Capital wont start flooding into US shale again until the oil price hits at least $50 or $60, so there could be some way to go. Far-sighted investors might see this as an opportunity to take an early position, although given the risks I would have hoped for a cheapervaluation than 13.6 times earnings while the yield is a relatively low 2.67%.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. The Motley Fool UK has recommended Weir. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
