(03-10-2020, 03:35 PM)HandsomeRob86 Wrote:

(03-10-2020, 05:33 AM)The Real Marty Wrote: If you buy oil companies with strong balance sheets, I think in the long run you will be okay.  But there will be a lot of companies that go bankrupt with oil at this price level and demand falling.

The reduction in demand is a short term phenomena IMO. And while I love cheap gas, it won't stay that way into the summer. Either way, cheap oil will decrease costs for flight, shipping, transport and travel. Plus the tons of petroleum based plastics out there. It boosts the economy all on its own, thereby increasing its own demand.

I think people have minimal idea how built on oil our whole society is. Consumer vehicles are like 5% of the demand. 

Anyhow, I agree that long term, oil is great buy right now. I mean people would have killed in the past to get 9% dividend yield from Exxon, its a blue chip.

Exxon has a very strong balance sheet, and it will survive any oil recession and probably absorb some of its competitors, but the one thing to watch out for is, Exxon is currently borrowing to pay that dividend.  They are going against the grain and unlike other big oil companies are spending huge amounts on exploration, and that's why they are borrowing to pay the dividend.  But why are they spending so much on exploration when oil prices are so low?  That's the big question- do they have the right strategy. 

The thing that comes to mind for me is, with oil prices so low, and banks under so much pressure as a result of large loans to oil companies, will Exxon be able to continue to borrow and pay that dividend?   Investors including banks might decide to pull back on all this lending to oil companies or demand higher interest rates for loans.  

Exxon at this price is probably a good buy if you are willing to hold it for at least 5 years.  That's my opinion.  I am often wrong.

The one to watch out for is Occidental.  That company is in danger.

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