I’m bullish about the prospects for the oil price, and that’s why I’m focusing on the outlooks of BP plc (LON:BP) (BP.L), Tullow Oil plc (LON:TLW) (TLW.L), Royal Dutch Shell Plc (LON:RDSB) (RDSB.L) and Hurricane Energy PLC (LON:HUR) (HUR.L). Could they deliver share price growth in the long run?
BP appears to be moving in the right direction when it comes to its financial performance. The company has been able to maintain what I feel is a solid asset base in spite of the difficulties it has faced since the 2010 oil spill.
In my view, BP could gradually become more appealing as an income stock. It has a 6% dividend yield and since dividends are due to be covered by profit this year, it could become a more realistic income option.
Shell may also offer high total returns in future. The company is expected to deliver improving free cash flow over the next few years, and this could mean that it is able to afford a higher dividend.
With Shell having what I see as a diverse asset base and strong balance sheet, the company could have a favourable risk to reward ratio. Its 5.5% dividend yield suggests it may be undervalued.
Hurricane Energy is looking ahead to first production from its Lancaster EPS in 2019. This could spark investor interest in the stock and lead to greater demand for its shares.
With Hurricane Energy’s net loss forecast to turn into a net profit next year, the company appears to have a bright outlook. If the oil price does continue to perform better than it has done in recent years, its valuation may rise.
Tullow Oil’s increasing production could be a positive catalyst on its share price. It may lead to a stronger balance sheet, with debt reduction being a key area for the business over the medium term.
With Tullow Oil also focusing on its exploration potential, it could offer an appealing balance between production and development potential. While risky and potentially volatile, it remains one of my preferred picks within the oil and gas sector.