reported at the end of January that
790 rigs were operating in the U.S.;
a year earlier, the figure was 1,045.
Meanwhile, demand has been tem-
pered by a sluggish global economy.
The U.S. has been puttering along at
about 2% growth for a decade now, and
China’s growth rate has been slowing
lately, hurt by trade friction and, most
recently, the coronavirus outbreak.
In addition, concerns about climate
change have led to a slow shift from
petroleum to renewable energy, such
as wind and solar, and an overall f lat-
lining of energy consumption due to
conservation. Last year, Americans
used less energy (in terms of BTUs,
or British Thermal Units, a common
measure) than a quarter-century ago.
Our use of renewables has roughly
doubled since 2002 (see “Invest in
the Planet,” on page 20).
Still, at this point, renewables are
not a major threat to the incumbents.
In 2018, fossil fuels (including coal)
accounted for 80% of U.S. energy con-
sumption; renewables, 11%; nuclear
power, the rest. Electric cars are
catching on, but natural gas and coal
generate 62% of the electricity that
makes them run; wind and solar, 8%;
nuclear and hydro, nearly all the rest.
And demand will continue to grow.In its outlook for 2020, the EIA pre-
dicted that energy use will keep rising
for the next 30 years, though more
slowly than GDP. Renewables will
cut into the market share of nuclear
and coal in generating electricity, but
natural gas will hold its share steady
at about three-eighths of the total.Take the plunge. Guessing the bottom
of any cycle is dangerous, but I see sig-
nificant opportunity in the oil patch.
Bad times can be good for the most
solid companies as weaker competi-
tors cut back or fail. SCHLUMBERGER (SLB,
$34), the best of the global oil service
firms, trading above $100 a share in
2014, now yields 5.9%. If you believe,
as I do, that oil isn’t over, then Schlum-
berger is an excellent bet. The same
applies to CONOCOPHILLIPS (COP, $59), an
E&P firm with extensive holdings and
real staying power, yielding 2.8%.
To make less risky long-term invest-
ments, my strong advice is to focus on
“midstream” companies, whose main
business is gathering, storing andBAD TIMES CAN BE GOOD FOR THE MOST SOLID COMPANIES
AS WEAKER COMPETITORS CUT BACK OR FAIL.moving petroleum products around.
These businesses can be hurt when oil
prices fall and their customers suffer,
but not nearly as much as E&P and
service companies.
You have excellent choices, all of
them substantial large caps. My favor-
ite is KINDER MORGAN (KMI, $21), which
transports oil and gas through 83,000
miles of pipelines and 146 terminals.
The stock lost half its value when
crude prices crashed in 2015, and it
still hasn’t recovered the loss; it yields
a lovely 4.8%, nearly three times the
rate of a 10-year U.S. Treasury bond.
Another good choice is THE WILLIAMS
COS. (WMB, $21), which both operates pipe-
lines and processes natural gas. The
stock is down by one-third over the past
two years, but analysts see revenues
and profits rising briskly this year.
Williams slashed its dividend in 2016
but has slowly been building it back,
and the shares now yield a remarkable
7.6%. I also recommend ONEOK (OKE, $75),
which, like Williams, is based in Okla-
homa and was founded more than a
century ago. Shares returned nearly
50% in 2019, but analysts still expect
earnings to increase more than 20%
in 2020. The stock yields 5%.
Also recommended: Calgary-based
ENBRIDGE (ENB, $41), with a market cap
of $86 billion and a yield of 6%, and
ENTERPRISE PRODUCTS PARTNERS (EPD, $26),
a limited partnership that is a mem-
ber of the Kiplinger Dividend 15 (see
page 37), with a yield of 6.9%.
The energy sector is in a transition,
but oil and gas are far from dead. The
fact is, if you want your portfolio to
ref lect the U.S. and global economies,
then you need energy. ■JAMES K. GLASSMAN CHAIRS GLASSMAN ADVISORY, A
PUBLIC-AFFAIRS CONSULTING FIRM. HE DOES NOT WRITE
ABOUT HIS CLIENTS. HE OWNS NONE OF THE STOCKS MEN-
TIONED IN THIS COLUMN. HIS MOST RECENT BOOK IS SAFETY
NET: THE STRATEGY FOR DE-RISKING YOUR INVESTMENTS IN
A TIME OF TURBULENCE.STEP CAREFULLY INTO THE OIL PATCH
Energy PlaysThe stocks below can handle hard times in a beleaguered industry, and they boast healthy
yields now.Company Symbol PricePrice-
earnings
ratio*1-year
return Yield
ConocoPhillips COP $59 16 –10.2% 2.8%
Enbridge ENB 41 21 17.1 6.0
Enterprise Products Ptnrs EPD 26 12 –0.5 6.9
Kinder Morgan KMI 21 22 20.8 4.8
Oneok OKE 75 20 22.2 5.0
Schlumberger SLB 34 21 –19.7 5.9
Williams Cos. WMB 21 21 –17.5 7.6
S&P 500-Stock Index 18 21.7% 1.9%
As of January 31. *Based on estimated 2020 earnings. SOURCES: Morningstar Inc., Zacks Investment Research.34 KIPLINGER’S PERSONAL FINANCE^ 04/2020
INVESTING