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3 oil & gas shares to buy at the bottom of the cycle

oil, gas, rig, resources, mining

Earlier this year, the Economist magazine published an article titled ‘The world’s most valuable resource is no longer oil, but data‘ in recognition of the increased importance of tech giants such as Google, Facebook and Amazon.

The price of brent crude oil, currently at US$57 per barrel, has traded below $100 for over 3 years now as the world continues its push to develop cheaper and more sustainable sources of energy.

However, the oil & gas industry still plays an important role in the global economy and when important industries are out of favour, it might be a good time to buy. Here are three oil & gas shares that are worth looking into:

Woodside Petroleum Limited (ASX: WPL) will likely benefit from long term global economic growth as demand for energy and gas in particular increases. The company’s immediate strategy is to increase cash generation by stepping up investment in growth and low capital projects. In line with this strategy, last week the company announced that its Wheatstone LNG asset had commenced production from its onshore facility near Onslow, Western Australia.

Santos Ltd (ASX: STO) is the second-largest Australian pure oil and gas exploration and production company behind Woodside. Its strategy is to maintain a core asset base with low production costs (e.g. its Cooper Basin & Gladstone LNG assets) as well as high margin assets such as PNG, Northern Australia, and WA Gas. Recently, broker Macquarie retained its outperform rating on Santos and increased the price target on its shares.

Beach Energy Ltd (ASX: BPT) produces about 10 million barrels of oil equivalent (mmboe) per year of oil, gas and gas liquids predominantly from joint ventures. It recently announced the results of its 3 for 14 accelerated non-renounceable pro-rata entitlement offer of new shares related to the acquisition of Lattice Energy from Origin Energy Ltd (ASX: ORG). Should the acquisition close successfully, FY 2018 production guidance will increase circa 150% to 25‐27 mmboe.

Foolish takeaway

Oil & gas, like other commodity-based industries is cyclical and investors will need to form a view on where we are in the cycle prior to investing. These three shares are well worth considering should you be looking within this industry.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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