The cost of oil may have surface above the break even point for oil operators to marginally profit compared to 18 months ago. Exploration, discoveries and projects may have almost halted for the past 24-30 months for all the major and small cap oil companies. Capital expenditure have been significantly reduce and focus on major cost reduction and company structure to a more leaner approach. It is clear that most of the currently operated assets are in its mature stages and moving onto the declining stages with very minimal shutdown for maintenance to meet their end of year expected performance output to keep shareholders and investors happy.
By 2020/2021, the oil and gas output production will be in decline due to several factors. Firstly, longer shutdown and maintenance campaign are required to mend these global assets end 2018/19. Explorations will be on the push in mid 2018. Output production will start to decline then followed by increasing demands. China, India, Brazil and America as they are still growing nations and require fossil energy to meet the demands despite the arrival of renewable energies. Electric cars would start to flood the market but still require fossil fuel electricity to charge the grids to supply power to these vehicles.
Secondly it takes an average of 6 years or more before new platform onshore and offshore before they are ready for production despite weekly news of big discoveries in papers. Through my calculated risk, 2020/2021 would be a pinnacle year for the Oil and Gas sector to start picking up pace again. This case is also supported by several major operators point of views in their recent statement.
There are four companies which I would recommend to invest on a medium terms with monies you can afford to set aside for five years. Out of the four companies, one is a stable one, second en-routing to globalisation, third a growing company and last one is riskiest but with highest potential returns.
Article written on the 17th August 2017 and the share price are as follows:-
Shell RDSB – 2060GBX, Woodgroup WG – 615 GBX, Enquest ENQ – 32BGX, UKOG 3.40BGX