Why I’m Surprised By These 4 Oil Stocks: Tullow Oil plc, Premier Oil PLC, BP PLC And Royal Dutch Shell Plc

The performance of these 4 oil stocks has been lower than I expected in 2017: Tullow Oil plc (LON:TLW) (LSE:TLW.L), Premier Oil PLC (LON:PMO) (LSE:PMO.L), BP PLC (LON:BP) (LSE:BP.L) and Royal Dutch Shell Plc (LON:RDSB) (LSE:RDSB.L)

BP plc
BP plc

Oil stocks have generally underperformed in 2017 in my opinion. The Brent oil price has fallen slightly from approximately $57 per barrel to approximately $55 per barrel, but even so I’d have expected oil stocks to perform better than they have. I was of the view that a cut in OPEC production could firm up the oil price and the performance of oil stocks. Therefore, I’m surprised by their performance in 2017, but I’m still upbeat about these 4 oil stocks for the long term.

Tullow Oil plc’s (LON:TLW) (LSE:TLW.L) stock price is 15% lower than at the start of the year. I’m optimistic about its strategy, since I think higher production could improve FCF and the performance of its shares. Higher profitability may allow Tullow Oil to reduce its balance sheet leverage, which may improve investor sentiment in the stock. Its development potential remains impressive in my view, and I think its shares could perform well on a relative basis.

BP plc (LON:BP) (LSE:BP.L) has registered a share price fall of 10% in 2017. However, I think it has long term investment appeal. I think the potential end of compensation payouts for the 2010 oil spill may help to increase the company’s financial performance. I also think BP still has a decent asset base which could provide earnings growth over the long run.

Royal Dutch Shell Plc’s (LON:RDSB) (LSE:RDSB.L) stock price is 5% lower than on 1 January 2017. This could be due to some profit taking after the 52% stock price rise in 2016. I feel Shell could rise over the medium term as the impact of the BG acquisition takes hold. It could improve the company’s FCF and lead to higher dividends per share for Shell’s investors. I also like Shell’s geographic diversity and its relatively modest balance sheet leverage

The stock price of Premier Oil PLC (LON:PMO) (LSE:PMO.L) has fallen 17% this year-to-date. While disappointing for the company’s investors, I think Premier Oil could have growth potential in the long run. I think its asset base may provide improving financial performance, while the decision to engage in acquisition activity during the lows of the oil price may prove to have been a good move. It doesn’t have the diversity of some of its larger peers, but I believe its stock price could be one to watch.

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