“Oil investors see bargains in the bottom of the barrel” ; March 14, 2015
Bargain-hunting investors are pouring money back into oil stocks and bonds, giving cash-strapped U.S. producers a surprise boost from some of the same people who yanked billions out when crude prices began falling last summer.
Influencing the move to equity sales is the realization that such debt is a burden, said Robert Santangelo, an investment banker at Credit Suisse. He said oil companies with profitable assets and competent management teams will be able to get equity capital even if they have high levels of debt, but firms with more debt than value tied to their oil wells might get left behind.
But is it a good idea for investors who are new to the cyclical oil industry?
“There are just so many variables at play here,” said Bill McDonald, a Houston attorney with Thompson & Knight.
Less experienced investors – eager to snare bargains on oil company stock before crude prices eventually go back up again – may struggle to navigate the complex global oil market, let alone pick out which companies might be the best picks, McDonald said.
“It’s certainly different than investing in real estate, say, or a building or something,” he said. “It’s a lot more complex. I think people are realizing that.”