BP plc, Royal Dutch Shell Plc And Tullow Oil plc Slump Further As Oil Hits New Record Lows

Falling oil is sending BP plc (LON:BP), Royal Dutch Shell Plc (LON:RDSB) and Tullow Oil plc (LON:TLW) shares ever lower.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The price of Brent Crude slumped below $55 a barrel yesterday for the first time in more than five years, and there are fears now that it could even dip below $50.

That is not helping our oil and gas producers, to put it mildly — and it’s not just the smaller and higher-risk companies that are suffering.

BP is hurting

BP (LSE: BP) (NYSE: BP.US) dropped 22.3p on the day, for a 5.4% fall to 388p. And with crashing oil prices added to the company’s still-unfinished Gulf of Mexico business, the shares are now down 26% from their July 52-week high of 527p.

There’s a 48% fall in earnings per share (EPS) expected for the year just ended, followed by a further slip of 11% in 2015, but there’s a recovery of 17% currently penciled in for 2016. Those will be rerated downwards should oil slip further, but we are looking at P/E values of 11 for 2015 dropping to just over 9 for 2016, with dividends yields in excess of 6%.

Dividends could be cut if oil drops much lower, but cover for 2016’s predicted payout currently stands at 1.66 times — it could be better, but that’s not too bad.

Same goes for Shell

Things are bad for Royal Dutch Shell (LSE: RDSB), too, with its shares suffering a loss of 112.5p (5%) yesterday to 2,123p. That’s well on the way to reversing the mini-recovery that looked to be starting in mid-December, and takes the shares down 29% now from their 12-month record of 2,991p.

The forecast picture for Shell is rosier, albeit still at the mercy of further oil falls, and there’s a 32% EPS rise expected for 2014 followed by -15% and +10% for the next two years.

Shell is facing similar P/E multiples to BP, of 9.7 for 2014 rising to only 10.4 by 2016. And though predicted dividend yields are a bit lower at around 5.5%, cover should be slightly stronger at 1.73 times for 2016.

Exploration risk

The worst performer of the three, by far, is Tullow Oil (LSE: TLW). Its shares dropped 18p yesterday to end 4.3% down at 396p, but that’s only a small part of the story — from a 52-week high of 920p set almost a year ago, the Tullow price has plummeted by 57%!

The problem with Tullow is its much higher risk compared to the other two, as it’s an explorer that’s expected to record a loss per share for 2014. The prognostications for the following two years are good, but low oil prices might mean a cutback in some of the firm’s exploration plans heading into 2015 and beyond.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Tullow Oil. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Yellow number one sitting on blue background
Investing For Beginners

My number 1 tip for Stocks and Shares ISA investors

This strategy has improved Edward Sheldon’s ISA returns dramatically and he thinks it could help other investors have more financial…

Read more »

White female supervisor working at an oil rig
Investing Articles

Down 20% in a year, is the BP share price simply too cheap to ignore?

After sliding for months, is the BP share price as low as it'll go? Even with the risk of more…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

4,123 shares of this UK dividend stock could get me £206 a month in passive income

Despite cutting its dividend significantly over the past five years, I think this FTSE 100 stock could be a good…

Read more »

Investing Articles

3 champion investments to beat the stock market in 2025

Looking for alpha? Dr James Fox details three investments that look destined to outperform the stock market in 2025 and…

Read more »

Investing Articles

2025 stock market recovery: a once-in-a-decade chance to get rich?

Zaven Boyrazian explains how he'd use the ongoing stock market recovery to his advantage, creating long-term wealth.

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

£20,000 in an ISA? Here’s how I’d aim to make £1,250 a month in passive income

Our writer thinks one rare FTSE 100 stock could help drive an ISA portfolio higher, resulting in a sizeable passive…

Read more »

Black father holding daughter in a field of cows
Investing Articles

£25k of savings? Consider aiming for a £1k+ monthly passive income via this strategy

With a long-term mindset, investors could target a four-figure monthly passive income by investing £25k in low-volatility blue-chip stocks.

Read more »

Investing Articles

The Rolls-Royce share price hit new highs in November. What next?

November has been another record-breaking month for the Rolls-Royce share price. And the outlook for 2025 still looks bright.

Read more »