Energy stocks are still attractive despite crude oil pressures, says top analyst Paul Sankey

Paul Sankey, Sankey Research, joins ‘Fast Money’ to talk the energy sector, pressure on crude oil prices, where to invest in the space and more.

MORE IMPORTANT THAN EXISTING HOME SALES FOR THEM. >>> LET’S MOVE ONTO ENERGY NOW, AS WE SKIP AROUND JUST A BIT A MIXED DAY FOR CRUDE PRICES, WITH WTI AND BRENT SETTLING IN OPPOSITE DIRECTIONS, AS A WEAKER GDP PRINT OUT OF CHINA STOKED CONCERNS ABOUT DEMAND. THAT MOVE COUPLED WITH ONGOING

CONCERNS IN THE RED SEA HAVE RIPPLE EFFECTS ON ENERGY EQUITIES THE OIH OIL SERVICES ETF, THERE YOU GO, YOUR ALPHABET SOUP, DROPPING A HALF PERCENT, TOUCHING ITS LOWEST LEVEL IN SIX MONTHS JOINING US NOW, PAUL SANKEY, PRESIDENT OF SANKEY RESEARCH WHEN YOU WERE HERE JUST A MINUTE

AGO, I BARELY RECOGNIZED YOU YOU WERE ALL BUNDLED UP. YOU LOOK LIKE ONE OF THE KANSAS CITY FANS. >> YEAH, FREEZING OUT THERES RIGHT? >> >> SO — FOR MUCH OF MY LIFE, IF THERE WAS ANYTHING GOING WRONG IN THE RED SEA, OIL PRICES SHOT UP >> YEAH.

>> STUFF IS GOING WRONG IN THE RED SEA AND THEY ARE NOT SHOOTING UP. >> AND IT’S A CONCERN FOR PEOPLE AND WE HAVE THE SAME THING WITH FREEZING WEATHER AND NATURAL GAS PRICES ARE NOT REACTING THAT WELL, SO, I THINK IT’S BEEN DISAPPOINTING TO OIL BULLS, IF

YOU WANT, THAT, YOU KNOW, WE’VE SEEN, AS YOU SAY, A DIRECT ATTACK ON SHIPPING, THE REROUTING OF SHIPPING, SO, THAT ALONE IS GOING TO CAUSE MORE TIME FOR THE OIL TO MOVE AROUND THE WORLD AND HIGHER COSTS, OBVIOUSLY. AND YET HERE WE ARE.

>> HERE WE ARE AT PRICES THAT AREN’T MARKEDLY HIGHER THAN THEY WERE SIX MONTHS AGO. >> RIGHT BUT THAT’S ANOTHER POINT STILL AT $75 BRENT, IN EXCESS OF $70 WTI, SO, IT’S NOT THE END OF THE WORLD. THESE ARE GOOD PRICES FOR THESE OIL COMPANIES THAT REALLY START

WORRYING TOWARDS $60 LAST TIME MAYBE A COUPLE OF MONTHS AGO, I WAS TALKING ABOUT, MAYBE SAUDI NEEDS TO FLUSH THIS MARKET, AND IN THAT CASE, THEY WOULD BE TAKING IT DOWN BELOW $60. $75 BRANT, YOU’RE GOING TO SEE GOOD CASH RETURNS. >> SUPPLY IS AMPLE, RIGHT?

>> YEAH, BECAUSE OF THE CAPACITY IN SAUDI ARABIA AND UAE. AND AGAIN, THIS IS ANOTHER THING THAT WE WOULD NEVER HAVE SEEN 20 YEARS AGO, THAT YOU’VE GOT 102 MILLION BARRELS A DAY OF OIL DEMAND, ALL-TIME RECORD HIGHS, AND YET YOU STILL HAVE 3, 4 MILLION BARRELS OF SPARE CAPACITY >> KAREN

>> SO, YOU JUST SAID SOMETHING ABOUT MAKING MONEY OVER $60. WHERE DOES IT START TO BE WHERE THE EQUITIES REALLY GET WORRIED PRIOR TO $60, I WOULD THINK? >> YEAH, WHAT THEY WOULD DO, BP CHANGED CEO, OR AT LEAST CONFIRMED THE CEO TODAY, EVERYTHING FOR THEM IS PLANNED AT $60

THEY ARE GUIDING TOWARDS $4 BILLION AT $60 YOU GET THAT YIELD FROM BP AT 60 THEY MAY PAY DOWN MORE DEBT, IN THE CASE OF BP, THEY MAY PAY MORE CATCH OUT, BUT ESSENTIALLY, $60 IS THE WORKING NUMBER FOR THE INDUSTRY ADDITIONALLY, IF YOU LOOK AT THE

MARGINAL REINVESTMENT, THEY TALK ABOUT $60. SO, THAT’S WHY MAYBE WE NEED TO GET BELOW $60 TO REALLY CALM DOWN U.S. SUPPLY GROWTH, WHICH IS ESSENTIALLY PART OF THE PROBLEM WITH OIL AND A BIG PROBLEM, PART OF THE PROBLEM IN NATURAL GAS. TOO MUCH SUPPLY FROM THESE U.S.

COMPANIES THAT ARE JUST DOING A GREAT JOB. >> STEVE >> SO, I GET ALL OF THAT JUST HELP ME THROUGH THIS PROCESS, BECAUSE WHEN I LOOK AT EXXON, I LOOK AT CHEVRON, THE M&A, ALL FOUR OF THOSE STOCKS ARE BELOW WHERE THE ANNOUNCEMENT

WAS, SO, I GET THE WHOLE IDEA, THE ACQUIRER USUALLY TRADES LOWER, THE ACQUIREE TRADES HIGHER ALL OF THEM ARE LOWER, SO — WE’VE HAD THE TIMES WHERE THEY WERE CORRELATED — I’M TRYING TO BREAK THE CORRELATION BETWEEN OIL THAT COULD FALL AND THE STOCKS THAT COULD RUN. >> RIGHT

>> I JUST DON’T SEE IT HAPPENING. WHY DO YOU THINK THERE’S BEEN SUCH LACKLUSTER PERFORMANCE OUT OF THE MERGER BUSINESS WITH FOUR NAMES THAT I MENTIONED >> WELL, IT’S A TOUGH ONE. THE FIRST THING IS THEY PAID WITH STOCK, RIGHT? SO, AS SOON AS YOU PAY WITH

STOCK, BOTH COMPANIES BECOME LINKED TO ONE ANOTHER AND AS THE SECTOR SOLD OFF, THE PRICE OF THE DEAL SIMPLY GOES DOWN. AND WE’VE SEEN MANY DEALS HERE AT RELATIVELY LOW PREMIUMS WHY HAVE THE MANAGEMENTS NOT ASKED NOR MONEY? PARTLY BECAUSE THEY CAN’T, PARTLY, I’VE GOT TO SAY IT,

BECAUSE THEY SELF-ENRICH, THEY GET CHANGE OF CONTROL AND YOU SEE PEOPLE SELLING OUT THAT, YOU KNOW, PERHAPS ARE GOING TO GET RICH THEMSELVES. THE CEO WILL GET RICH WITHOUT CARING TOO MUCH OF THE PREMIUM SO, THAT’S BEEN DISAPPOINTING. BUT THERE’S JUST NOT THAT MANY BIDS THERE’S REALLY ONLY CHEVRON AND

EXXON THAT CAN DO THESE KIND OF DEALS. GENERALLY