Oil production and exploration has always been one sector I have shied away from and there is one simple reason for it; it is far too dependent on the price of oil (obviously!). But I have recently read some interesting articles on junior oil producers which make me very interested in opening a position. Which brought me to the realisation that I haven’t spent much time valuing oil companies and as such, I need to refresh myself with the terminology, the methods to value an oil company and everything else to do with this sector.
The best way for me to refresh my understanding is to write an article, and this has the added benefit that everyone else can learn too!
Oil Prices affect the value of an oil company
So to start this series off, I will look at the single most important factor in the value of an oil company, and that is the price of oil. It isn’t hard to find, the website I use is InfoMine and their oil chart is below.
Hedge against it?
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