Business & Investment

Oil inventory is increasing! What are you doing with BP and Shell stocks?

Crude oil prices have been rising primarily over the past few weeks. OPEC decision In order not to ease the curb of supply. Indeed, oil prices have now risen to nearly $ 70, more than triple that of this time last year.Of course, oil inventories around the world are now benefiting, which includes both. BP (LSE: BP) And shell (LSE: RDSB).. Some expect oil prices to rise further as demand begins to pick up. But what am I doing now, as the pandemic still raises issues and concerns about the longevity of many of these petroleum reserves?

Royal Dutch Shell Stock

2020 was not a fun year for Royal Dutch Shell. Full-year revenue shows this, with losses of over $ 21 billion. The loss was primarily due to the company’s $ 16.8 billion impairment expense in the second quarter. In addition to this, like many other European oil stocks, Shell had to cut dividends.

Still, it’s clear that the pandemic has hit the shell hard, but I can still identify some positive points that are moving forward. First, the company was able to reduce operating costs by 12%, but in the future there may be opportunities for further reductions. This can help your company increase profitability in the long run. Second, Shell demonstrates its commitment to renewable energy. That deal to buy Ubitricity Shows this and may help alleviate shareholder concerns that the company is not adapting to the future. Finally, there is room for more dividends. In fact, the third quarter trading renewal last October raised dividends by 4%. If our business performance improves, we will continue to strive to give back to our shareholders.

Due to these slightly improved fate, I hold my shell stock for now. This is despite the many hurdles the company faces, including the fact that its net debt exceeds $ 75 billion. For companies struggling with profitability, this can hinder the transition to renewable energy and the ability of oil stocks to return large sums of money to shareholders.

Transition of oil stock to renewable energy

Compared to many other oil stocks, BP has announced a faster transition to renewable energy. In the long run, I’m confident that this will help boost profits and extend the life of the company. However, it takes time to make a profit from this part of the business.

There is also the issue of debt. Currently, net debt is $ 39 billion, which is expected to increase further in the first half of 2021. This was due to severance pay, payment of the Gulf of Mexico oil spill, and the completion of an offshore wind joint venture. Equinor.. This makes BP more urgent to expand its operating cash flow and is primarily driven by soaring oil prices.

But I am confident in the future of BP stocks. Management looks strong enough to drive the transition to renewable energy, and current high oil prices should also help. Therefore, I hold a BP stake.

Stuart Blair owns shares in Royal Dutch Shell and BP. The Motley Fool UK does not have a position in any of the listed shares. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by examining different insights, Better investors than us.

Oil inventory is increasing! What are you doing with BP and Shell stocks? Oil inventory is increasing! What are you doing with BP and Shell stocks?

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