This is an investment decision that doesn't keep me awake at night worrying. WPL is a low cost producer, with a strong balance sheet, good assets, strong management, and relatively low debt. It can make a profit with oil at $40 per barrel and I expect will pay 3-4% dividend even if conditions are challenging.
Three to five years...? Demand will be much higher -- the world's economy cannot recover without oil and gas. It's impossible to rely on wind and solar, despite what some in the media may be projecting or wish. I expect a supply problem then as well, because so many projects were cancelled in 2020. It's not possible to press a button and instantly ramp-up production. Everyone is talking about 'will demand increase?' but I expect supply to be as big a factor in three to five years as demand..
So, higher demand and less supply. Throw in an inevitable, but as-yet unknown Middle East conflict or terrorist attack in an oil-producing country, and it's highly likely the newspapers will be full of stories of unhappy motorists paying $1.80 per litre for petrol. However, every time you go to your local petrol station to fill up, you'll be the only person standing in line with a smile on your face -- knowing your WPL shares are now at $35-$40. Worst case scenario, with a subdued recovery, I think it's at $30. Either way, at some point oil will hit $60 within five years and as a high tide raises all ships, each extra dollar per barrel equals pure bottom line profit; WPL gets to $30. I just can't see WPL languishing at $20 per share (or lower) indefinitely. Oil prices rise and so does the share prices of the energy sector. Commentators will be on TV smart-after-the-fact, saying how inevitable it all was back in August 2020 and how 'lucky' investors who bought then had doubled their money.
I bought at $23 (a small parcel) and have averaged-down to $21.50. Each time it drops 5% I buy a few more. The upcoming dividend will be reinvested. Most brokers rate this a 'Buy' or 'Strong Buy'. It's a classic case of buying something out-of-favour and patiently waiting for conditions to turn in your favour -- which they will. It's a matter of 'when' not 'if'.
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