In this video clip of "The High Energy Show" on Motley Fool Live, recorded on Feb. 1, Fool contributors Travis Hoium, Jason Hall, and John Bromels chat about the future prospects for consolidation by major players in the oil industry.
Travis Hoium: I want to bring up an analogy because it seems a little bit like smoking and Altria (MO +1.22%) would be the stock to think about 20 or 30 years ago, you could see that business being not at all a growth business, but a very good cash flow business.
Jason Hall: Right.
Hoium: A dying business, but not a dead business.
Hall: Right.
Hoium: Happens to be phenomenal stock over a long period of time. Is that what we're going to see from oil and gas companies over the next 20 years where you go, hey, none of these companies are growing, but maybe there's some consolidation. You have a handful of big companies that are making most of the money and they're just cash-flow machines, is that where we're headed? What do you think, John?
John Bromels: I don't know. I tend to think we're going to see more things happening, like what happened with BP (BP 0.04%) a couple of years ago. Here's one of the five-oil majors, biggest oil companies on the planet. Basically saying, we're going to transition away from oil and we're going to make our investments in clean energy, and really trying to at least start to turn that Titanic ship into being an energy company as opposed to an oil company.
You see something of the same thing with Royal Dutch Shell (SHEL 0.44%), where it is also making more investments in clean energy, a lot of investments on Shell's part in natural gas, which is seen as being cleaner than oil. A lot of other, not the giant majors necessarily, but some of the smaller European oil companies which do have quite a bit of market cap doing the same. A lot of that, as you mentioned, is driven by investors. This is a lot of shareholders agitating big shareholders, putting pressure on those companies, and I think that's been a lot more successful in Europe than it has in the United States for these big oil companies.
But my guess is, and again, this is just a guess. My guess is that that's actually where some of these companies are going to go because as we mentioned, they are sitting on big cash hoards. They have global reach. They have a lot of assets, human resources, financial resources, supply chain resources, and I would guess that the ones that are going to be the most successful moving forward, what's funny is it's not happening right now. The companies that are made those transitions like literally are right now falling behind the ExxonMobil's (XOM +0.65%) of the world's, who've doubled down on oil.
I think you're going to see these transitions to using those resources to gradually incorporate more clean energy into the mix, turning themselves into energy companies as opposed to oil companies rather than doubling down.
