My #1 Oil Play (That Wall Street Is Getting Wrong)

You’re receiving this email as part of your subscription to Andrew Zatlin’s Moneyball Daily [Unsubscribe]( [Moneyball Economics] My #1 Oil Play (That Wall Street Is Getting Wrong) Tuesday, February 22, 2022 Given what’s happening with Russia-Ukraine, oil has jumped to almost $100. At that level, there might still be some upside left — but there’s also major downside. So today I’ll share a way to make money from oil… No matter which direction its price goes from here. [CLICK HERE TO LAUNCH VIDEO OR READ THE FULL TRANSCRIPT BELOW »»]( > ADVERTISEMENT < Stocks in 2022: "You have weeks to move your cash" Legendary investor's new prediction could alter the course of your financial life. The clock is ticking. [Full story here.]( For a transcript of this video, see below. This transcript has been lightly edited for length and clarity. My #1 Oil Play (That Wall Street Is Getting Wrong) Welcome to Moneyball Economics! Today, I want to share a powerful way to invest in the Oil and Gas sector. The price of oil is currently about $95 per barrel. That’s high. The conflict between Russia and Ukraine is playing a role here. There might still be upside left — but at levels like that, there’s also major downside. But what if we could capture this upside… while avoiding the downside? We can. And today I’ll show you how. Exploration & Production (E&P) You know the classic Hollywood image of the roughneck working in a massive field, oil spurting out of the ground? That’s the Exploration & Production sector of the Oil & Gas industry. This is feet-on-the-street drilling — it’s the oil rigs at work. And by focusing on this segment, I believe investors like us can: - Take advantage of the strength of the oil and gas industry… - Avoid most of the potential downside… - And capture the upside that I believe Wall Street is missing! Feet-on-the Street There are a few parts of E&P. Drilling is also called the upstream. The midstream involves oil transportation. And the downstream involves oil refining. As an economist and investor, I focus on upstream drilling because there’s a tight relationship between oil rig activity and oil prices. Let me show you what I mean: This is the Baker Hughes Rig Count. Baker Hughes (Nasdaq: BKR) is a $30 billion company that manages oil rigs. The blue line tracks oil rigs in operation, while the red line tracks the price of oil. Typically, the two lines move in lockstep. As the price of oil rises — and particularly as it jumps above $70 — so does oil rig activity. That’s because the higher the price of oil, the more money these companies can make. An Opportunity Presents Itself As you can see on the chart, during Covid’s emergence in 2020, the number of oil rigs plummeted as the price of oil fell to around $30 a barrel. Once we got into 2021, as demand for oil soared, prices started shooting up. But notice what happened? Oil rig activity lagged. Despite increased demand, the number of oil rigs reached only about half the expected number. And for investors like us, this is creating an opportunity… An Upside Surprise On Wall Street, when a company reports higher earnings than analysts had been predicting, that’s called an upside surprise. And as you might expect, an upside surprise can trigger a quick increase in the company’s stock price. To show you what might turn out to be an excellent example of this, look at a drilling company called Patterson-UTI (Nasdaq: PTEN). Patterson’s CEO recently reported that his oil rigs are almost 100% utilized, and that the rates his company charges would be going up. Makes sense: demand is high and availability is low, so prices are starting to shoot up. As long as the price of oil is above $70, Patterson can set its service contracts and equipment rentals where it wants them. And as it turns out, most experts believe the price of oil will remain above $73 for the year. The funny thing is, this hasn’t been priced into Patterson’s stock price yet… A Double? To see what I mean, look here: This chart shows oil prices (red line) and Patterson’s stock price (blue line). Just like rig activity, Patterson’s stock price usually moves up and down in line with the price of oil. But right now, oil prices are about twice Patterson’s stock price. Hypothetically, that means Patterson’s stock price could soon double. > ADVERTISEMENT < Buy Live Nation (LYV) Immediately Wall Street legend who helped create America's stock rating system says this stock could soon be rated a "Strong Buy" at every bank in New York City and Boston. "It's all part of the biggest prediction of my 50-year career on Wall Street," he says. "A massive and surprising new transition that could determine the next group of millionaires." [Click here to learn more.]( Where There’s Data, There’s Proof Of course, this potential profit play isn’t just based on wishful thinking… I’m also looking at my proprietary data — including hiring figures. As you know, this is one of my go-to sources of data. Any company can talk the talk. But is it walking the walk? Its hiring data reveals everything. And sure enough, I see nothing but hiring strength in E&P companies. For example, this chart shows hiring activity for Baker Hughes: And this next chart reflects hiring for FMC Corp (NYSE: FMC), a company that manages oil rigs. Just look at its recent hiring activity — it’s gone practically vertical! Again, the demand in this sector is huge. To meet this demand, the number of rigs in operation has to double. For a company like Patterson or Baker Hughes or FMC, as long as oil prices are above a certain level, and demand is outstripping supply… They stand to make far more money than expected. And again, that’s what can lead to an upside surprise. One More Thing… Another aspect to consider is dividends. You see, some companies in this sector are paying annual dividends that can reach 3%. That level of dividend is going to attract a lot of buyers. And that means the valuations of these companies could climb even higher than Wall Street is expecting. Bottom line: the winds are at the back of these companies. And they’re sailing ahead. My #1 E&P Play Today I showed you three different E&P stocks you should take a look at. But I’d also like to share my favorite stock in the drilling-services business. This play takes advantage of the key to profiting from this sector: timing. So if you’re a “Pro” subscriber, check out the play below ASAP. In the meantime, Zatlin out. I’ll talk to you soon. FOR MONEYBALL PRO READERS ONLY > [LEARN MORE]( < In it to win it, [Andrew Zatlin] Andrew Zatlin Moneyball Economics Copyright 2022 © Moneyball Economics, All rights reserved. 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