Tuesday, September 20, 2011

How to profit from the eventuality peak oil using dividend stocks.

I was reading about the peak oil theory over at The Oil Drum and I came to the conclusion that peak oil ( the world reaching it's maximum oil production  as in the highest production amount possible in barrels per day ) will likely happen in our lifetime. ( oil will never run out only become more and more expensive to increase / maintain production levels )

So how does one profit from peak oil ?
Simply put, by investing in oil companies, especially ones with large oil reserves and long life assets.

What does that mean ?
It means oil Juniors like BMO Junior Oil Index ETF If you like the conservative hands off approach and don't mind paying 0.50% in management fees. Investing in Junior producers or exploration companies is a risky business that is why an ETF is a good idea.

What about unconventional oil ?
Yes Oil sands, Cardium, Bakken, etc are all good investments because of the large reserves and long production life.

Do you have any picks ?
My top pick is SUNCOR ( SU ) with 50 year plus reserve life, and a nav of 54$ a share it is trading at a huge discounted valuation. my other picks are DAYLIGHT ENERGY ( DAY ), PENN WEST PETROLUIM ( PWE ) and PETROBAKKEN (PBN) all of which pay dividends.

What if peak oil does not happen ?
Even If peak oil does not happen, some other energy crisis or oil bubble will happen sooner or later. Either escalation of the situation in Syria, Yemen, Iran, The middle east will have another crisis sooner or later.

Disclamer I am long SU, DAY, PWE and PBN. I am often invested in the companies I mention. I believe they are good investments otherwise I would not mention it.