ETF-ization of Oil Stocks Makes Everything Equal

Oils are not equal, even though they trade together. This morning Shell (RDS.A - commentary - Trade Now) reported profits down 67%, which is 15 points more than BP (BP - commentary - Trade Now), and this matters. Conoco (COP - commentary - Trade Now) was just disastrous, down 76%, with the worse combination of bad refining and horrid natural gas numbers. Yet they are all pretty much treated equally. Meanwhile, Chevron (CVX - commentary - Trade Now) gave you a 4.6% increase in the dividend, something they hinted they could do because of the great growth of output that is hitting now. Reserves are growing.

I am hoping that these become de-ETF'd, meaning that they can trade on their own so stock-picking matters again. That's what's happening, for example, with the banks, where a different kind of reserves is distinguishing the players.

But the temptation of players to group them has led to ridiculous moves that obliterate the great work of management at BP, for example, where costs are still being taken out, or the horrid work of Valero (VLO - commentary - Trade Now), the pure refinery play that made miserable bets on heavy crude, thereby single-handedly ending the golden age of refining.

To me, the pecking order of these is clear: BP for its big and safe dividend; then Chevron because of reserve growth and projects coming on stream; then Shell, which was simply not so hot; then Conoco, just plain bad; and Valero, worst in show.

Not all oils are created equal, but you only notice when the price of crude gets hammered.

Interesting Warren Buffett-like "tide going out" lesson to see who is naked. Valero, go put some clothes on, Conoco, borrow something to wear from BP.

At the time of publication, Cramer was long BP and Chevron.

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