The oil and gas industry is usually divided into three major sectors: upstream (or exploration and production– E&P), midstream and downstream. The upstream sector includes searching for potential underground or underwater crude oil and natural gas fields, drilling exploratory wells, and subsequently drilling and operating the wells that recover and bring the crude oil or raw natural gas to the surface. There has been a significant shift toward including unconventional gas as a part of the upstream sector, and corresponding developments in liquefied natural gas (LNG) processing and transport.
(Above text attributed to Wikipedia Article )
Organisations that operate in the upstream field include but are not limited to the following
- Integrated Oil & Gas Companies (firms with upstream and downstream operations usually large players e.g. BP, Chevron)
- Independent Oil & Gas Compaies (focussed on either upstream or downstream operations )
- Oil Service Companies ( Companies that provide services to the Oil industry e.g. Haliburton )
- Oil Equipment Manufacturer ( Companies that provide special equipment to the Oil industry e.g. Helix Energy Services)
- Well Security companies
Special Benefit: Investing in Upstream companies
The stock price of Upstream firms is most closely impacted by the daily changes of the Oil Price and political developments.
Upstream firms specialised in the exploration of new oil / gas fields offer plenty upside in case an explored Oil Field has proven vast resources or more resources then anticipated, these companies on the flipside usually have hight debt levels and downside risks associated with missing cashflow from ongoing operations.
M&A in the Upstream field is very common as larger firms purchase valuable drilling rights and expand to improve economies of scale. M&A activity was almost muted in 2014 but since picked up greatly M&A deals worth 60 BN traded in Q1 2017 alone. https://www.forbes.com/sites/woodmackenzie/2017/05/01/upstream-ma-erupts/#626c6eca1693
Some of the Upstream firms featured in the OIL-I.com Investment Report gained up to 200% in 3 months, prove of the high potential and volatility in the Upstream field.