I've been looking at this since 2015 and have pulled the trigger a few times. One of the trigger was Penn West, for a few months in 2016, and a regularly updated long-term price picture showing the stock price evolution (and name change) has been one of the reasons holding me back.
But maybe Vinod is right at this point?
The odds for a reversal of fortune appear to be high but it's hard (at least for me) to come up with a reasonable framework. I thought a WTI price range of 40 to 60 would be a potential input for entry and exit points but now, if I eventually bring this idea to fruition, I wonder if a basket approach would have a better risk-return profile. The basket would contain two majors: Royal Dutch Shell ADR and Exxon, an integrated Canadian: Suncor and two natural gas candidates: Tourmaline and Arc Resources.
Why:
From a fundamental point of view, supply factors continue to look favorable and I think the transition will take longer than presently discounted. Also, looking at some charts, on a relative basis, O+G stocks are way down in the neglected and despised bin. Take a look at the following graphs (pages 53, 54 and 55 of document). Note: I think the title of the document should be:
In independent Thought We Trust and I don't intend on buying gold this time around.
https://acting-man.com/blog/media/2019/10/Chartbook%20of%20the%20IGWTreport%202019.pdfWhy not:
Looking at the above charts and spotting the last two times when relative valuations looked favorable, first, during the nifty-fifty era, the gap was closed when markets came back to reality, a process which happened during an oil crisis and second, during the dot-com episode, the gap was closed when markets came back to reality, a process which happened during the massive rise in energy demand from China (think PetroChina investment). This time around, there does not seem be a supply-driven context on top of the general supply-related variables and the jury is still out on the market reality component.
At this point, in my book, the why not wins but this is an interesting area to follow.