Investors who think that putting their money into any oil stock is a certain winner could be in for a surprise; there have been some fortunes to be made, but there have also been disappointments.
The number one oil and gas performer in the past five years was JKX Oil and Gas, with a whopping gain of 2,965%.
The firm is a FTSE 250 exploration and production company with principal interests in Ukraine, plus other interests in Georgia, Bulgaria, Turkey, America and Italy.
In the past year, oil and gas shares on the FTSE 100 index were up 14% compared with a 7% decline in the main market, underpinned by high crude prices and the impact of commodity prices pushing oil and gas shares up.
International oil and gas companies are also cash rich and, with rising oil prices, remain attractive stocks that are fairly immune to the credit crunch.
The leading oil and gas performers in the All Share FTSE oil and gas index over the past 12 months were Hardy (104% gain), Emerald (103% gain) and Tullow (100% gain).
Only two stocks fell: Venture Production by 1% and Imperial Energy by 22%.
The FTSE Aim (Alternative Investment Market) oil and gas index averaged 5,282 in the 12-month period, with a low of 4,582 in January this year and high of 5,873 in July last year.
Meanwhile, the oilfield service sector has seen a dramatic change over the past few months as a result of takeover activity.
The acquisition of Abbot Group by First Reserve, the planned sale of Expro Group and the possibility of Hunting being taken over has led to dramatic leaps in the price of many shares.
Wood Group also continues to make some very positive noises and has just joined the FTSE 100.
Oilfield services continue to show very positive results and opportunities for growth, especially overseas, make companies working in this area exciting prospects for private-equity investment in the mid market.
At the junior end of the oil and gas market, mid-cap oil and gas companies have been the star performers.
This is evident in the FTSE All Share index where the top 10 risers included one oilfield service group and five oil and gas stocks.
Aim oil and gas stocks have grown exponentially in the past five years, up 290% over the period, as oil prices have surged and many of the junior players have developed good oil prospects in areas where the majors had not focused.
The rise has been so great that it is now classed as a “super sector” on Aim, along with basic resources and food and beverages.
While other sectors have suffered because of the impact of the credit crunch, mid-cap oil and gas companies have put in strong performances based on the strength of high oil prices and little impact from weak debt markets, since they are funded primarily by equity.
While the soaring price of oil is undoubtedly benefiting oil stocks and shares, however, it also leaves some losers such as fuel-reliant transport companies.
Meanwhile, for the junior companies that have not seen exploration or appraisal success, the future landscape looks less rosy with more consolidation likely. For the bigger companies, replenishing and growing their reserve base will be a key factor behind their future position.
With the perception that there continues to be a sustained demand for oil, in general oil stocks are seen as a safe investment choice, even when the price of black gold is fluctuating.
With no significant downward pressure on crude oil prices, the bigger companies will grow, providing they manage to find reserves from their exploration and development activity.
Recommended for you
