Big Oil: A Safe Investment?

Oil Selloff: Integrated Majors as Flight to Safety

Excerpt:

Thanks to their integrated structures, companies like Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), BP plc (BP), Royal Dutch Shell plc (RDS.A), TOTAL S.A. (TOT) are able to withstand plunging oil prices and still protect their top and bottom lines on downstream strength. With the refining unit of these conglomerates being buyers of crude – whose price is in a freefall – their profitability improves due to a fall in the input cost. The companies’ financial flexibility and strong balance sheet are real assets in this highly-uncertain period for the economy. Most of them remain in excellent financial health, with ample cash on hand and investment-grade credit ratings with a manageable debt-to-capitalization ratio. On top of this, managements have established quite a track record of conservative capital management and cash returns to shareholders. They also pay a growing and safe dividend, yielding attractive returns. In terms of assets, the integrated players own a strong and diversified portfolio of global energy businesses that offer attractive long-term growth opportunities. Their strong inventory of development projects and increased capital expenditures should help volume growth in the long run

Comment: Image source. Also consider: How Cheap Oil Complicates Investing - While Retail Stocks Benefit, Others Take It on the Chin