NEW YORK (TheStreet) -- I was talking to Jim Cramer today about oil and oil stocks and advising investors to approach both with a very long view.
Oil stocks have dropped to levels I thought we might never see again, accompanied by an oil price that is equally surprising.
While oil has experienced the "perfect storm" of events to drive the price lower, I still do not see the fundamental reasons why oil can stay at close to $80 or lower over the long haul. Still, I have been an observer of oil markets for close to 30 years, and when the oil trade has lost steam in this way in the past it has taken many months for it to regain interest from hedge funds and other speculative investors, still the strongest influence on oil prices. I expect flattish oil prices for the next several weeks.
I was telling Jim, however, that I thought even a six-month period of depressed oil prices would decimate dozens of smaller, highly leveraged oil companies. I thought the most vulnerable area was in the Bakken shale in the Dakotas. Ultimately, a weakened group of smaller producers would impact capex into the shale plays and at the least level-off production from the shale plays here in the United States, if not cause production to actually decrease for the first time in years.
Again, that decrease in production would lead to another huge round of consolidations and supply strains, ultimately again supporting crude prices -- but that is not an instantaneous event and could take more than a year to be fully realized.
So although a new spike in oil prices might be a very long time away, the prices of many well established, well- funded oil companies with great asset portfolios and top notch technology are not only guaranteed to survive this consolidation period, but are also currently priced at generationally low entry prices.
I'm working with several analysts I trust to help me identify not only the best of these companies, but also the companies that should be avoided. I am beginning a series on these names on Real Money starting on Thursday, but as a teaser to TheStreet readers, one company I am convinced is well priced and will thrive even with low sustained oil prices for months is EOG Resources (EOG - Get Report) .
I talk more with Jim in the video above.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates EOG RESOURCES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate EOG RESOURCES INC (EOG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, good cash flow from operations, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."
You can view the full analysis from the report here: EOG Ratings Report