Underexposed - Effect of falling oil prices on Canadian Stocks

January 14th, 2015, 07:34 PM

I am not allowed to express my opinions on the falling oil prices because the owner of the The CL Crude-analysis Thread does not like me and has place me on ignore so after one response to the poll I was forbidden to offer any more comments.

But that is fair I suppose since the majority there have no interest in Canadian stocks and long term/swing trades of the same. It is primarily for futures traders as I see it so this discussion will not interfere with their discussion as it will focus on Canadian issues.

It is not easy to get a comparison on a S&P Capped Energy index so I chose a Horizon ETF [HXE:TSX] on Energy which includes natural gas as well as oil.

Here is the comparison between the NYSE Oil index, the Dow Jones average, the S&P TSX composite and the HXE Canadian ETF.

Looking at the DJA and S&P TSX Composite index by themselves does not tell the tale of the effect on Oil prices between the two countries, though as you can see the TSX has suffered far more than the DJA.

It is the NYSE Oil index and the Horizons S&P/TSX Energy ETF that really tell the story on the effect of falling oil prices on the industry. Both of these charts reflect the effect on companies specific on the energy sector... sice it is those companies that make up the indices and etf.

As you can see the effect is very harsh on Canadian energy stocks compared to their American counterparts.

It has become very serious in Alberta, Canada as billions of revenue for the province coffers have been lost to date. and this is the province that HAD (past tense) the strongest economy in the country.

Suncor cuts $1B in capital spending, plans to [AUTOLINK]chop[/AUTOLINK] 1,000 positions | Calgary Herald

you can see the effect on just one major Oil company in the Oil Sands.... others are following suit.

Please contribute your thoughts on this crisis...I say crisis as most feel we are entering a recession because of these games with the oil prices....nice to have cheaper gasoline but it is pretty lame if your job disappears.

January 15th, 2015, 01:00 AM

Don't get me wrong.... if you are prepared for the crisis and have a decent amount of money held in Cash there will be beaucoup opportunity when this nonsense sorts itself out.

Out of curiosity I did comparisons on prices of similar price levels.

this is what I found:

a) share price > $50

b) share price $30 - $50

c) share price $15- $30

d) share price $10- $15

e) share price $5- $10

the "obvious" observation here is that the lower the share price the more severe the drop in share price. There are many more stocks under $10 on the TSX in the O&G industry and I have not even considered the TSX Venture exchange

at all levels there is opportunity...especially if you are looking for good dividend paying stock. The lower priced stocks may become the prey of more solvent higher priced stocks... a lot of these lower priced stocks were only profitable at $110/barrel oil... at $40/barrel they will be struggling to stay afloat of their debt if they are debt laden... but the bigger boys will be looking to expand their lease holdings at bargain basement prices, I am thinking.

I would like this thread to be comments by viewers here on various O&G companies. One cannot be everywhere in such a large group of stocks

I am looking for a dialog here... If that does not happen I will assume no interest and let the thread drop.... Though I will be doing my own DD to find opportunities myself.

I look forward to discussions here.....

January 15th, 2015, 01:28 AM

Also seems to have an indirect effect on the Canadian banks. Might not be related though but they're also going down.

January 15th, 2015, 04:41 AM

yes... I don't really understand why at this point other than that the banks have had a good run of late and a correction is due.

But I don't think it is as bad...yet. I think the fall there is about 5%... not 25-50%.

If this gets worse there will be a lot of services to the oil patch that will be caught in the net. With companies shaving billions of dollars off their budgets for 2015 it means less supplies bought, cut back in service contracts, reduced drilling programs... the list is endless. Governments will be socked with more debt to survive without the juice the oil and gas royalties provide them and Alberta has been depending on them a lot.

it is a huge cluster-f IMHO... eventually I will do a comparison of this fall with oil prices falling to 2008-2009 where the USA and world banks fell apart and oil prices rose... this may be revealing

Underexposed - Effect of falling oil prices on Canadian Stocks

Discussion in Stocks and ETFs

Underexposed - Effect of falling oil prices on Canadian Stocks