I’ve bought… and continue to buy… energy stuff. OXY and EQT in particular.
OXY is interesting because they recently survived a financial crisis during an acquisition battle, thanks to Berkshire help. They have now greatly increased their assets and their cash flow is being used to rapidly pay down their accumulated debt. I think it’ll lead to some strong share gains. Some speculation that Berkshire will buy the company but that’s not part of my investing thesis… I suspect such a purchase would reduce my anticipated gains.
EQT is also interesting. The following is from a post that has been deleted… fortunately, I saved the text:
Gas stocks have been particularly hard hit recently. Industry leader EQT (EQT) the country’s largest producer, is down more than 30% from its June high, to $34. However, gas demand is more recession-resistant than oil because of its use for electric power and heating. And then there’s the long-term bull case, keyed off growing worldwide demand for liquefied natural gas.
There is no bigger gas booster than EQT’s CEO, Toby Rice, who advocates for a quadrupling in U.S. LNG capacity by 2030. If that happened, U.S. natural gas could easily replace Europe’s current imports from Russia. He calls the coal-to-gas conversion in overseas power generation “the largest green initiative on the planet.” Gas produces about half the carbon emissions of coal.
EQT shares look attractive; its way-below-market hedges will roll off in 2023, resulting in sharply higher free cash flow. “It’s a really exciting story,” Rice tells Barron’s. “I need to do a better job of explaining it, because right now EQT trades [at] over a 25% free-cash-flow yield. It’s an incredible investment opportunity.” He’s referring to projected 2023 free cash flow.
The key part of my investing thesis is related to their low priced hedges rolling off. The LNG export thing might or might not happen, IMO.
Yeah, oil and NG prices may drop but I see the possibilities of these companies transcending the pricing environment.
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.