Pumpjack in Glennpool oil field, Oklahoma (photo credit: Roy Luck, courtesy of Wikimedia Commons)
The world is running out of oil… so might as well buy a few shares in the companies that make it and move it around.
Having had some cash free up in the retirement account, I went shopping for some Oklahoma oil and gas companies. Locavesting, as it were.
ConocoPhillips (COP) I talked about in this post a few months ago, where I was vacillating between ENI, Total, Statoil, Petrobras and COP. In the end, I ended up with Petrobras, giving COP a pass for the time being. A few weeks ago, I took a nibble with 30 shares at around $77.
OneOK Partners LP has just announced that they will build a two-billion dollar pipeline from the Bakken oil play to Cushing OK. That’s good, it unlocks more domestic oil production, sending down to the Gulf Coast where prices are higher, and, it helps out my other peeps like PetroBakken. I dipped in with 50 shares at around $55, for a 5.90% total portfolio share. A tasty 4.5% yearly dividend yield wasn’t the primary motivation, but a nice bonus. Another pipeline company expanding its transport capacity to service Canadian oil producers is Kinder Morgan Energy, with a planned $5 billion-with-a-B expansion of its Trans-Mountain pipeline to the West Coast. Opponents of the XL Pipeline take heed: that oil has got to go somewhere, and Asian consumers will be lining up to purchase at a convenient West Coast terminals. Canadians are much easier to deal with than conflict-ridden areas like South Sudan and the Persian Gulf.
OneOK Partners is a little pricey in terms of Price to Tangible book, but I’m looking at its nice dividend growth history as a consolation.
The shares of both OneOK and ConocoPhillips have taken a slight dump since the buy-in, but that’s OK, in for the long haul. Here’s how the portfolio stacks up, as of a couple days ago:
101 Centavos Div Portfolio, April 2012
The portfolio is up 6.42% from last December close, but down from last month. I really need to add another column or another sheet showing that, but I’m too lazy for now. The Redneck Dividend Investing Portfolio, on the other hand, is kicking butt with 23% gain from inception.
Redneck Dividends
(the Redneck Dividends portfolio is just four stocks that form a subset of the overall portfolio. A good reader suggestion from Maggie @ Square Pennies was adding Wal-Mart to this subset)
VALE‘s stock has also taken a bit of a dump in the last couple months along with general commodities. Business though, is quite strong (Forbes, “Vale Is Hiring Thousands“). Planning to hire 10,000 people a year for the next three years is not for the weak of growth or stomach. The price of nickel, a major component of Vale’s income, is down at around $8 a pound, but that’s not necessarily bad news, as this hurts Chinese producers of nickel pig iron (NPI), which depend on higher nickel prices to turn a profit.
One major change was the disposal of half the position in PetroBakken (PBN on the Toronto Stock Exchange, PBKEF here in the US). This reduces exposure to PBN to 4.43% of the portfolio, which is just fine. The only other honker left, in terms of portfolio allocation, is Silver Wheaton at slightly over 13%, and I plan to let that ride until it gets past a bit past the cost basis, and then dispose of half of it. I might even take a closer look at Newmont Mining, if I was of a mind to increase the category of precious metals dividend payers.
PGH has also taken a minor nosedive lately, down 5.04% from the entry point, but still cranking out that dividend. PGH was recently featured in our friend Beating the Index’s analysis of the Viking oil formation in Canada.
That’s all for this update. Stay tuned for a more in-depth look at the fascinating topic of nickel pig iron (really!), and how it relates to innovation, sustainability and pollution.
You know, I’m not a finance guy, but I feel like your first sentence doesn ‘entirely make sense! If the oil industry is on the outs, shouldn’t you be putting your time and investmetns into companies with alternate sources of energy?
TB at BlueCollarWorkman recently posted..Sheriffs Kick Down Doors in the Real World
Hi TB – I’m keenly interested in alternate sources of energy, but I find that the best way to approach that is from the ground level, as in, our own home. Maybe it’s just me, I haven’t found any biogas, biomass, ethanol, solar or wind energy companies that are tasty enough to invest in. I’ve taken a small dip in geothermal, but so far it’s not done very well. The oil and gas and powergen industries, on the other hand, I know well enough and offer good prospects, and nevermind the ups and downs of the market.
If a slight dip in oil is worrying, you should look at coal stocks! Quite brutal!
MoneyCone recently posted..In Pursuit Of The Most Rewarding Rewards Card
MC – I’ve not looked at large coal mining stocks in quite some time. I was ogling Massey Energy for a while, and then their mine disaster struck. Since then it’s been bought out. I see what you’re saying though, Arch Coal has been beat down to a five year low, and Peabody Energy is definitely off its game. Great stock symbol on Peabody, by the way… BTU!
My spouse is a big believer in Peak Oil, as are a lot of academics, geologists, industry veterans (like the late Matthew Simmons), and the like. We’ve made some relatively significant investments in Canadian royalty trusts, like Enerplus. If you like income from your investments and believe oil prices will mostly only go higher, these are worth a look.
Kurt @ Money Counselor recently posted..3 Diamonds and a Dog #4
Hi Kurt – some would say that it’s not that liquid fuels are going higher, it’s that the currencies that are used to purchase them are being devalued. No doubt that exploring and producing for oil and gas is becoming more of a challenge, but as long as companies like Chevron and Shell and the other majors are investing in difficult and technically complex ultra-deep offshore projects, I’ll keep my toe in the water, so to speak. That’s a crazy yield on Enerplus, do you think it’s long-term sustainable?
Fracking and new discoveries like the Bakken have pretty taken the bite out of Peak Oil Theory. But that doesn’t mean oil prices won’t remain on the high side. Take a look a Linn Energy (LINE).
The Biz of Life recently posted..Quote of the Day: Donald Boudreaux
Linn Energy looks interesting. Do you own any?
I own 100 shares, would like to get a dip in price to buy a couple hundred more.
The Biz of Life recently posted..Economic Trivia: Visualizing Ocean Shipping and Trade 1750-1850
I work for that big co. that’s causing Obama some headaches (should I let the Cajuns in?!?) right now. Sometimes I wonder if I’m not diversifying enough by investing, working – and living!! local. But it’s the devil I know…
Jacq recently posted..I gave at the (tax) office…
Oh, FWIW, Encana has set up the first natural gas fueling station in N.A. down in Louisiana. Just fleet trucks right now, but I have high(er) hopes for the industry with news like that.
Jacq recently posted..I gave at the (tax) office…
Hi Jacq – NGL vehicles, or flex-fuel vehicles are the way to go! I understand that in Brazil they have cars which can run on alchohol, gasoline *and* NGL.
As for all the hullabaloo over the XL pipeline, I think that some of the arguments put forward by opponents are a little bit of bunk. Like for example, the concern over the pipeline crossing parts of the Ogallala acquifer. Um, the acquifer is *already* crisscrossed by oil and gas pipelines.
Exactly! We’re all scratching our heads over the stupidity. Maybe it’s a good thing – we need to go more global and barriers like that push alternatives.
I’m going to disagree on the pipelines – there’s some really good oil companies that aren’t benefiting from investor $ even though they’re posting record profits. I see a pretty big opportunity there – while everyone’s flooding into pipelines (literally), I think it might be a bit herd-ish.
http://www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/investors-are-the-casualties-in-a-booming-oil-patch/article2409657/
Jacq recently posted..I gave at the (tax) office…
Forgive me, Jacq, I don’t know what we’re disagreeing about. In fact, I’m with you on the lack of love being shown oil exploration companies. I’ve got a couple that have been banged about like a screen door in a windstorm.
For the rest of my life, oil will be needed. I hope to have another 50 years of health on this earth, which would make me 88.
I’m investing more and more into pipelines, drilling and energy companies in general.
The cost of energy is only going to go up. I’m looking at KMI, COP and XOM for my portfolio. I will strike when the price is right for me
Good update!
My Own Advisor recently posted..Weekend Reading – Interest rates holding, Senators stock rising and great blogs
Hi Mark! For the rest of all our lives, *energy* will be needed. It’s fun to figure out where from and in what form this energy will be. I like pipeline companies. The infrastructure stays there and operates and delivers a return no matter who owns it.
I wonder if energy will become a form of credit at some point. You do some work for me in exchange for this many watt-hours… this is one type of currency I could see an energy-intensive heavily-computerized world using.
Invest It Wisely recently posted..Weekend Reading: What Lies Ahead Edition
The redneck portfolio is doing GREAT! for energy though, we’ve seen this movie before, risk on and risk off…probably the low of the cycle is the best time to purchase these ones as they are still making good coin on oil and will be “rediscovered” by investors sooner or later.
BeatingTheIndex recently posted..Winstar Resources: Undervalued Oil and Gas Junior in Tunisia