The decrease in crude prices weighs on the shares of oil companies since the beginning of the year. More than one is circulating in the lands that I think should attract the attention of value investors.

It was one of the most dramatic BP (LSE: BP) – After 23 % decreased since the beginning of January, the share has now become a profit return of more than 6 %. But there are some things that investors should know.

evaluation

On his face, BP is very similar coincidence (LSE: Shil) – The other FTSE 100 Oil specializes. For example, each of the percentage from price to a number of prices (P/E) is about nine based on the expected profits next year.

In addition, each of them has costs equivalent to about $ 60 a barrel. As long as oil prices remain higher than this level – which generally have since the epidemic – both companies are still profitable.

The two are also similar in terms of strategy. After an unsuccessful project in renewable energy sources, BP turned its priorities into hydrocarbons, where shell was concentrated.

This makes it look as if there is no big difference between the stock. But there is at least one difference that investors need to pay attention to.

Public budget

This year Berkshire Hathaway The shareholders meeting, Warren Buffett said he spends more time looking at public budgets more than most investors. And with BP and Shell, this reveals completely.

Shell has a debt rate to property rights 0.4. This means that the company can cleanse all its debts by increasing the number of shares by 40 %.

In contrast, BP has a debt ratio to property rights 1.2. Thus, removing its debts by issuing shares will require more than twice the number of suspended shares.

The debt ratio to the 1.2 property rights is not only higher than Shell, it is high according to the historical standards of BP. It is higher than it was during the Covid-19s and this is a great danger.

Investing in oil companies

Low oil prices weighing energy shares, but I actually believe that low prices make this time appropriate to buy. The question is whether BP is the most attractive opportunity.

As I see it, the company’s public budget is the biggest risk with the arrow at the present time. The company makes moves to try to reduce debt levels through cost and abstraction savings.

The problem is that I am not convinced that now is an appropriate time for oil companies to sell assets. When the prices are low, it is better to be a buyer of the seller.

As a result, I do not see BP shares denied less than their value – at least, not related to other oil companies. I am not against the industry as a whole, but I think there are better opportunities to look elsewhere.

Activity

It should be noted that there is an active investor on board the BP. Elliott Management became a major contributor earlier this year and pressed for reform.

This can generate strong returns. But with oil prices dropping on energy shares in all fields, I search elsewhere in the oil and gas sector for my private portfolio.