Royal Blunders In Oil

Jun.27.12 | About: Royal Dutch (RDS.A)

Royal Dutch Shell (NYSE:RDS.A) shrewdly prepared for this week's EU summit by flushing its money down the toilet on Tuesday, buying back a modest amount of shares at around $65 a share. "This is a great move for us" CEO Peter Voser might have been thinking.

It's hard to blame a CEO for buying back shares when his P/E multiple sits at a miniscule 6.6 and his dividend yield has ballooned over 4%.

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Royal also trades at just $8/share above its book value, compare that with Exxon (NYSE:XOM) (Exxon's current share price is above $80)

Exxon trades at more than twice its book value. So why is Mr. Voser making a mistake buying back shares here? Because Europe is a mess and Angela Merkel has done the will of her electorate and dug in her heels.

Cheap stocks can get cheaper and if this summit does not deliver results the "bargain" $65/share Mr. Voser paid may start to look short-sighted indeed.

This morning Royal is trading down .58% in the pre-market, BP (NYSE:BP) is down about a half percent as well. All eyes are on the EU summit and if the European leaders don't deliver then - cheap or not - we are far from a bottom.

Royal is not the only energy name that is cheap right now, the whole sector has been sold off and here are some other names to consider as the EU summit gets under way: Arch Coal Inc (NYSE:ACI), Alpha Natural Resources, Inc. (NYSE:ANR), Apache Corporation (NYSE:APA), Baker Hughes Incorporated (NYSE:BHI), Peabody Energy Corporation (NYSE:BTU), Chesapeake Energy Corporation (NYSE:CHK), ConocoPhillips (NYSE:COP), Chevron Corporation (NYSE:CVX), Devon Energy Corporation (NYSE:DVN), Enbridge Energy Partners, L.P. (NYSE:EEP), EOG Resources, Inc. (NYSE:EOG), Halliburton Company (NYSE:HAL), Hess Corp. (NYSE:HES), Linn Energy, LLC (NASDAQ:LINE), Marathon Oil Corporation (NYSE:MRO), National-Oilwell Varco, Inc. (NYSE:NOV), Plains All American Pipeline, L.P. (NYSE:PAA), Petroleo Brasileiro SA (ADR) (NYSE:PBR), Penn West Petroleum Ltd (NYSE:USA) (NYSE:PWE), Royal Dutch Shell plc (ADR) (NYSE:), Seadrill Ltd (NYSE:SDRL), Schlumberger Limited. (NYSE:SLB), Statoil ASA (ADR) (NYSE:STO), Suncor Energy Inc. (NYSE:SU), TOTAL S.A. (ADR) (NYSE:TOT), Valero Energy Corporation (NYSE:VLO), Exxon Mobil Corporation (NYSE:)

Disclosure: I am long ACI.