When a sector is down in the dumps and investors are eyeing up a possible recovery, the big question is always about the timing -- are we at the bottom yet and is it time to pile in?
I don't subscribe to that approach myself, believing that getting the right company at the right valuation is far more important (and more achievable) than getting the timing right. But having said that, when it comes to the big FTSE 100 oil companies, I think the timing might be just about perfect now.
Talks between OPEC members about possibly controlling the oversupply of oil have restored a bit of confidence, and Brent Crude has perked up to $35.25 a barrel -- still not great, but better than the $28-29 depths it was plumbing in mid-January.
In turn, BP(LSE: BP) shares have gained a little, picking up 13% since 11 February to 351p. BP boss Bob Dudley famously opined in January 2015 that we could be in for low oil prices for up to three years -- and that was back when $50 was being seen as low, so I think he's not going to be far off the mark.
Mr Dudley really wasn't too worried, because giants like BP are in a financial position to hold out for lengthy periods like this. The firm has offloaded some assets and has shelved production at some of its more costly operations, but unlike some others it's not highly geared and isn't close to facing a debt crisis -- in fact, BP would have very little problem if it needed to go for a bond offering to raise cash.
And BP has kept its dividend payment going. Shareholders enjoyed a massive 7.9% yield in 2015, and there's 7.4% forecast for the current year -- and the company has reiterated its commitment to keep the payments going.
Royal Dutch Shell(LSE: RDSB) is in a very similar position, though its share price has been more volatile than BP's. Shell shares slumped to a low of 1,278p on 20 January, but since then we've seen a 27% recovery to today's 1,617p.
Shell has also kept its dividends going, and there's a 7.6% yield forecast for 2016. Though Shell has been less vociferous than BP in its dividend promises, the fact that it's keeping the 2015 payout pegged at 188 cents per share has reassured the markets that a cut is not likely to be on the agenda in the shorter term. And though I think there's a reasonable chance we will see a reduction in the medium term, the resulting lower yield should still be a pretty attractive one.
Shell does have the integration of newly-acquired BG Group to deal with, and it's arguable that it overpaid on the deal, which was arranged when oil was significantly higher. We've seen a lot of cost cutting too, and the latest news is of thousands more job cuts to come.
Of course, we could still see chaos at OPEC, the oil taps carrying on gushing, and the black stuff falling as low as the $20 that some of the growliest bears are fearing. But the longer term upside for BP and Shell just has to be excellent, and with income investors increasingly being drawn in by these high yields, I'm bullish about the two of them. Those looking to invest in the oil business today have possibly never had it so good.
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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.