With the oil price on historical lows, I wanted to spend some time researching oil companies. I am not only looking for stocks, which may make a comeback. I also want to look for large corporations that may be too big to fail. Did the United States not help the banking industry in 2008? With this in mind, I would be expecting Trump to help out the oil industry. We are talking about thousands of jobs in the United States and millions of jobs in other countries.
Sunoco LP (SUN)
Sunoco LP is focused on the distribution and retailing of motor fuels in the United States. The company is one of the largest independent fuel distributors in the country. Besides, a significant amount of people work with Sunoco. If Trump decides to help this company, he will be helping out more than 2900 employees and families. If you want to know a bit about its financial figures, remember the numbers mentioned in the succeeding sentence. In 2019, the company generated total sales of more than $16 billion, and net income of $313 million. I don’t know whether the company is too big to fail, but those financial figures are not small.
The Coronavirus will most likely not push the company’s profitability. However, I do believe that the company will survive. At the end of the day, the American people will be in need of oil for their cars.
ExOne Company (XOM)
Founded by John D. Rockefeller in 2008, oil producer Exxon Mobil Corporation had a market capitalization of more than $450 billion. As of today, the market capitalization is less than $190 billion. Most people will most likely see these figures as an interesting opportunity. We are talking about a company, which had, in 2019, more than 23,857 net operated wells and proved reserves of 22.4 billion oil-equivalent barrels. But, this is not the most important. What, in my view, matters the most is that 74,000 employees work for XOM. Is that not too big to fail?
BP p.l.c. (BP)
BP p.l.c. is a multinational oil and gas company headquartered in London, England. Like XOM, it operates through three segments; Upstream, Downstream, and Rosneft. It was founded in 1889, thus it has gone through many other financial crises. I wonder why many people believe that this time will be different. In my opinion, if the company needs additional financing to operate, the Queen of the United Kingdom will help. In the last financial crisis, The Royal Bank of Scotland received financing. Why would it be different for BP? We are talking about more than 70,000 families.
Diamondback Energy, Inc. (FANG)
Diamondback Energy, Inc., is an oil and natural gas company, which explores and produces onshore oil and natural gas reserves in the Permian Basin in West Texas. Among the different oil operators, I would not be interested in FANG. I don’t see a lot of trouble in FANG’s financial figures. However, the company’s total headcount is too low. In my opinion, governments will not be helping out oil operators with less than 1,000 employees. It is the case of Diamondback Energy. With this in mind, always make your own due diligence.
In this article, I had a quick look at three stocks that I like. Besides, I also pointed out the type of company that I currently dislike. Don’t get me wrong. I have nothing against small oil and gas operators. However, please understand that the oil industry is going through a very difficult time. In the next few years, many small operators may go out of business. We need to stay close to the large corporations. Finally, let me tell it once again, do your due diligence.
Disclosure: I may buy BP, XOM, and SUN, but I, right now, don’t own shares.