Some oil stocks are a better investment than others when oil prices are low, according to Kiplinger's Personal Finance. During periods of low oil prices, integrated oil companies continue to produce earnings, whereas energy service, exploration and production companies do not.
Integrated oil companies, such as Chevron, Exxon, Royal Dutch Shell and Total, have both upstream and downstream operations. While the upstream oil production operations may struggle when the price of oil drops, the refining, chemical manufacturing and retail operations benefit. Low crude oil prices increase earnings for downstream operations, which stabilizes overall company earnings, notes Kiplinger's.
Integrated oil companies have solid balance sheets, enabling them to purchase struggling companies at bargain prices during a downturn, explains Kiplinger's. When oil prices rise, these companies are even stronger. Another benefit of investing in integrated companies is that they typically continue to pay dividends when their stock price drops.
Energy services companies have a lot more exposure to falling oil prices. For companies such as Halliburton, a drilling rig provider, earnings decrease when rig counts decrease. Similarly, exploration and production companies experience a drop in the value of assets when oil prices fall, note Kiplinger's. When the price of oil dropped in 2015, the share price of Nobel Energy fell in direct proportion to the value of its assets.