Posted by Zoe Geoffrion , on Jun, 2017
If you asked your friends or your financial advisors which are the best oil and gas companies from an investor’s standpoint, you probably heard something different from everyone. It is important to keep in mind several factors when making the choice on your own about which companies to invest in. Ideally you have enough capital to invest in more than one, or in a fund that comprises multiple oil and gas concerns so that your dollar is spread more evenly. The truth is, no one really knows what the best oil and gas companies are to invest in now, because the companies that are performing well now might not be five years down the road–or even next year. Fluctuations in their performance are practically guaranteed due to any number of market or geopolitical factors ranging from regulations on energy and environmental policy to foreign policy and politics to market supply and demand. The best oil companies to invest in? Technically all of them.
However, a general rule of thumb is that it is more lucrative and also safer to invest closer to the source. In the industry, the term for oil well and drilling firms are known as “upstream” companies because they are closer to the source of the oil. If you have the opportunity to invest upstream, do it. The great thing about investing upstream is that you have more control over the commodity and the pricing of that commodity versus investing downstream, which is far more susceptible to political fluctuations.
Also think about whether you are in it for the short term or the long haul. There are no rights or wrongs. You might want to spread your investment thin, or if you have a penchant for taking risks, invest a larger amount of money into a specific firm or project including even owning your own oil well.