BP PLC (BP)

(A Top Pick May 16, 2017, Up 20%) Lots of free cash flow which covers their dividend, unlike other companies that borrow money to. He expects dividend increases. They're actually investing big in renewables. Big oil is investing their profits in green because they see renewables as their future in 20 years as oil declines.

This was the big oil leak in the Gulf of Mexico. The US changed the rules and applied therapeutic sanctions and retroactively wrote legislation. The company had to sell off some assets and slowly started to rebuild. European oil is starting to recover quite nicely and generally had a decent year. The company has started to go back into exploration, and is now starting to be followed by the other majors. Assuming the conditions of OPEC supply constraint remain, the Saudi/Aramco goes public, then longer-term we will see a higher energy price, but it won't be immediate. A company like this will do okay. Thinks it has a more upside. Prefers Royal Dutch Shell.

It is an ADR so she does not typically trade it. It has been out of favour, however. She is hesitant to jump into any energy stocks.

Compared with other integrateds?A company that makes money at $50 oil. Part of their business benefits from oil prices, petrochemicals and refining. They are earning their hefty 6% level dividend with their own free cash flow. These large integrateds are going to underperform if oil does really, really well. They are using their free cash flow to make intelligent acquisitions. Rising dividends are in the cards even if oil stays at $50.

The Macondo Gulf of Mexico disaster is now past and they have taken all the charges. They’ve rebuilt the company. The balance sheet is in very strong shape. With the cost structure where it is, even at these commodity prices, this company is throwing off lots of cash flow. Dividend yield of 6.7% is sustainable at current commodity prices. This is the cheapest of all the major integrateds. (Analysts’ price target is $37.50.)

He thinks oil prices have bottomed and will start to move higher in fits and starts. They had issues in the past that are behind them now. They are a good company to own and are a cash cow.

At current oil prices, most European oil companies are going to cover the dividends. Most of the baggage for this company is now behind them. As we get into an environment where oil starts to stabilize politically, at around the current price and a little higher, then you will start to see yield compression. You are looking at some pretty decent upside from here. An interesting company and the balance sheet is reasonable. 6.5% dividend yield.

One thing is that safety issues are not new to this company. Within the majors that operate within the US, this has been the one with the worst safety record. You can’t attract and retain quality employees if they are concerned about health and safety. Also, they have basically run all of their foreign operations through the US, so they are very exposed in terms of liability. He also is not interested in investing in oil and gas.

Any time he sees a dividend over 5%, he starts to get a little concerned. Higher-quality names like this have really seen capital flow into them, given the meltdown we have seen on oil. Trading in the 30s in regard to PE, and at these levels there isn’t much patience for any bad news, and he would expect a pullback.

Very much like all the other super majors. A very disciplined, very large project company with global assets. They are all categorized as safer businesses, more steady stream, not a lot of growth, and in really bad oil markets funds tend to allocate their money into them as safer places. His view is that the oil cycle is turning. This one is cheap trading at 4.5 X this year’s EBITDA. There is virtually no growth in the business. Prefers Suncor (SU-T), which has non-declining assets. (See Top Picks.)

(Bought when Cdn$ was at par. Sell and convert back to Cdn$?) You probably made 30% on the currency, but you lost 30% on the stock. Sector is cheap now, so wouldn’t recommend selling, but would recommend buying. He would look to sell some of those and lock in the FX gain, but roll that exposure into a Canadian ETF like an XEG-T so that when oil recovers, you don’t have the currency risk.

Would not have particularly favourable momentum characteristics for him. It is great that the lawsuits are behind them, but in general the price momentum on some of the stocks is not favourable.

(Top Pick Apr 24/14, Down 7.09%) We may see a roll over again, but otherwise he would say it is a buy. Chip away at it.

(Top Pick Jan 6/14, Down 8.78%) It is such a cheap stock with a single digit multiple and a 5% yield, but that could get cut. It throws off a ton of free cash flow. They may become a net acquirer of cheap energy assets.

British Petroleum (BP-N) or Royal Dutch Shell (RDS.B-N)? If you are looking for as much safety as you can in the commodity sector, Royal Dutch Shell has the best balance sheet of the 2. If you want a little more volatility, this would be the one. He likes both companies.