TM editors' note: This article discusses a penny stock and/or microcap. Such stocks are easily manipulated; do your own careful due diligence.
A quick drop to $20/barrel oil could be the best thing for energy companies with enough cash in the bank to take advantage of the sharp bounce predicted in the wake of such a dramatic fall. In this interview with The Energy Report, newsletter writer Chen Lin names two companies that could not only survive the oil price downturn, but also are perfectly positioned in the global market to start generating barrels of cash for investors.
The Energy Report: In an interview with The Energy Report in 2013, you predicted the oil price decline that has burdened junior oil investors this year. What are you seeing now?
Chen Lin: I'm seeing capitulation. I see a lot of energy companies, especially those high-cost, highly leveraged companies, going out of business. I expect that to continue. However, I also see a bright future for energy companies that can survive the downturn, as we move out of this phase of the cycle.
TER: What are the indicators you're watching? Are you looking at rig counts, storage levels, news headlines from China?
CL: I'm watching everything. Rig counts are at a bottom. Storage is high. Our friends at Goldman Sachs are predicting $20 per barrel ($20/bbl) oil. Remember, less than 10 years ago, they were predicting $200/bbl oil. That is quite a difference. A dip that low could wash out all the weaker hands. Actually, I would love to see that happen. If oil really goes to the $20s, that would be a great bargain-hunting opportunity.
I'm also watching China very closely. China could be in deep trouble. That keeps me up at night. investing is hard work. There is a lot to watch, and I have to constantly be talking to people and asking questions. However, there is a very well-defined energy cycle. Last year, I saw the oil peak coming down. When oil was $100/bbl, I told my subscribers that it was the top and we got out of a lot of energy positions. This year, I see great opportunity ahead. I hope Goldman Sachs is right. If oil really goes to $20/bbl, that will be the bargain of a lifetime.
