Big Oil Asset Selling is Bullish
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Feb
24
Tim Lambert
Big Oil Asset Selling is Bullish
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Many “Big Oil” firms such as Royal Dutch Shell (NYSE: RDS-B), the second largest in the world, Occidental Petroleum (NYSE: OXY), and BP PLC (NYSE: BP), Europe’s second largest, have been selling assets.

That would seem to imply that there is a bearish future for the sector.  But it is the opposite for oil and natural gas firms.  That is why the price of the exchange traded funds for oil, United States Oil (NYSE: USO), and natural gas, United States Natural Gas (NYSE: UNG), are rising.

Royal Dutch Shell, Occidental Petroleum, BP PLC, and others are selling to focus on core holdings.

That is bullish as it evinces these companies are establishing a solid foundation to meet the rising demand for energy, as detailed in a previous article on this site.  The firms want to have a bountiful base of oil and natural gas properties.  Establishing it now before the demand from China, India, and other companies soars is shrewd business sense.

Even more savvy is focusing on buying assets in North America.

Companies are selling off holdings in risky areas and redeploying the proceeds to North America.  An article in Los Angeles Times, as an example, reported how Occidental Petroleum is pulling back from the Middle East and North Africa.  There was a piece in The Wall Street Journal about Royal Dutch Shell selling its holdings in Nigeria, due to theft.  In addition to that, promising small caps such as Mondial Ventures (OTN: MNVND) are operating in the oil and natural rich areas of Texas.  What Royal Dutch Shell, Mondial Ventures, and other well-run companies in oil and natural gas realize is that the most upside is in North America due to to plentiful reserves, political stability, and economic security.

Selling off assets certainly has not hurt the stock price of energy entities such as Royal Dutch Shell, as it is up more than 24 percent for the last year (chart below).

 

 



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