1. Select region

3. Select role

Institutional Intermediary

This website is not suitable for retail investors. If you are a retail investor, please contact your financial advisor.


Change country


You are about to enter a website for professional/institutional investors and the information contained herein is not suitable for retail investors. Private/retail investors should not proceed any further.

By clicking “Accept” you expressly acknowledge and confirm that you are accessing this site for the purposes of acquiring information as a professional/institutional investor and accept the Terms of Use.


    Your access to and use of the web sites (“Services”) of Wellington Management are conditioned on your acceptance of and compliance with these Terms of Use (“Terms”). By accessing or using the Services, you agree to be bound by these Terms. If you are accepting these Terms and using the Services on behalf of a company, organization, government, or other legal entity, you represent and warrant that you are authorized to do so. You may use the Services only in compliance with these Terms and all applicable local, state, national, and international laws, rules, and regulations.

    All materials on this web site are owned or licensed by Wellington Management and/or its third-party providers and are protected by US and international intellectual property laws.  Unless otherwise indicated, all service marks, trademarks, and logos appearing on this web site are the exclusive property of Wellington Management. The information, materials, and other content of this web site may not be copied, displayed, distributed, downloaded, licensed, modified, published, reposted, reproduced, reused, sold, transmitted, used to create a derivative work, or otherwise used for public or commercial purposes without the express written consent of Wellington Management.

    Products and services
    The information, materials, products, and services on this web site are current at the time of writing and are subject to change. Not all products and services are available in all geographic areas. Your eligibility for particular products or services is subject to determination by and the approval of Wellington Management. No solicitation is made by Wellington Management to any person to use any information, materials, products, or services in any jurisdiction where the provision of such information, materials, products, and services is prohibited by law.

    The information on this web site or in any communication containing a link to this web site is not intended to constitute investment advice or an offer to sell, or the solicitation of an offer to purchase shares or other securities.

    Investment products and services are available through Wellington Management. Investment products and services are not FDIC-insured, are not deposits or obligations of, or guaranteed by, any bank, and involve investment risks, including the possible loss of the principal amount invested. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or invest in a fund.

    International use
    Wellington Management makes no warranties that materials on this web site are appropriate for use in countries other than the US. Because the web site may be accessed internationally, you agree to comply with all local laws, rules, and regulations including, without limitation, all laws, rules and regulations in effect in the country in which you reside and the country from which you access the web site. The information on this web site is not intended for distribution to, or use by, any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation, or which would subject Wellington Management or its affiliates to any registration requirement within such jurisdiction or country.

    No warranty
    Wellington Management does not warrant the accuracy, adequacy, completeness, or timeliness of the information, materials, products, and services on this web site or the error-free use of this web site. All information, materials, products, and services are “as is” and “as available.” No warranty of any kind, express or implied, including but not limited to the warranties of non-infringement of third-party rights, title, merchantability, fitness for a particular purpose, and freedom from computer virus is given in conjunction with the information, materials, products, and services. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. Wellington Management does not warrant that the web site will meet your needs. You agree to assume the entire risk as to your use of the web site.

    Limitation of liability
    In no event shall Wellington Management be liable for any damages, losses, or liabilities including without limitation, direct or indirect, special incidental, consequential damages, losses, or liabilities, in connection with your use of this web site or your reliance on or use or inability to use the information, materials, products, and services on this web site, or in connection with any failure of performance, error, omission, interruption, defect, delay in operation or transmission, computer virus, or line or system failure, even if Wellington Management is advised of the possibility of such damages, losses, or expenses.


    As a condition of your use of the Services, you agree to indemnify and hold Wellington Management, its affiliates, and its and their respective partners, directors, employees, and agents harmless from and against any and all claims, losses, liability, costs, and expenses (including but not limited to attorneys’ fees) arising from your use of the web site or from your violation of these Terms.

    Your use of the hyperlinks on this web site to other Internet web sites is at your own risk. Wellington Management is not responsible for the content or accuracy of third-party web sites hyperlinked from this web site, nor does it guarantee the products or services offered on third-party web sites. You should review the privacy statements of a web site before you provide any personal or confidential information.

    Web site security and restrictions on use
    As a condition to your use of Services, you agree that you will not, and you will not take any action intended to:  (i) access data that is not intended for you; (ii) invade the privacy of, obtain the identity of, or obtain any personal information about any other user of this web site; (iii) probe, scan, or test the vulnerability of this web site or Wellington Management’s network or breach security or authentication measures without proper authorization; (iv) attempt to interfere with service to any user, host, or network or otherwise attempt to disrupt our business; or (v) send unsolicited mail, including promotions and/or advertising of products and services. Unauthorized use of the web site or Services, including but not limited to unauthorized entry into Wellington Management’s systems, misuse of passwords, or misuse of any information posted to a web site, is strictly prohibited. Portions of the web site are designated for password access only as indicated by a lock icon. In these instances, if you do not have an authorized password, no access is permitted.

    Confidentiality and password security
    Certain parts of this web site may be protected by passwords or require a login. You are responsible for maintaining the confidentiality of any user names, passwords, security questions, and answers. All information available through the privileged area of the site is confidential and proprietary to us. This includes all investment information and results, offering materials, financial statements, and other information provided through this part of the site.

    You will use your best efforts to keep all this information strictly confidential. You will not disclose any of this information to any person or use it for any purpose other than those strictly permitted by us, in writing.

    If any provision of these Terms is deemed unlawful, void, or for any reason unenforceable, then that provision will be reformed only to the extent necessary to make it enforceable, and it will be deemed severable from these Terms and will not affect the validity and enforceability of the remaining provisions.

    Applicable law
    These Terms and any action related thereto are governed by Massachusetts law and applicable US federal law. Any dispute relating to the above shall be resolved solely in the state or federal courts located in Massachusetts.

    Privacy statement
    Wellington Management respects the privacy of its clients and the confidentiality of information pertaining to its clients.

    Information we collect
    We may collect non-public personal information about you on RFPs, questionnaires, and other forms we receive from you, as well as from personal contacts such as correspondence, e-mail, telephone calls, or meetings. We may also receive information about you from third parties, such as your accountants, lawyers, financial consultants, and/or other service providers.

    It also is possible to receive information from web browsers and apps regarding certain of your online activities using cookies, or other common tracking technologies.  Some web browsers and other applications may provide a Do Not Track (DNT) preference setting.  When a user turns on a tracking preference, the browser or application may send a message to web sites requesting that they do or do not track the user. At this time, we take no actions in response to any DNT settings or messages.

    Information sharing
    Wellington Management seeks to provide seamless service to all clients. To facilitate that process, information regarding client accounts is shared broadly between affiliates within the Wellington Management group of companies. For example, an affiliate may share information with other affiliates in order to facilitate portfolio management or provide client liaison services to a particular client. Client information may be used by Wellington Management in order to identify potential client needs for additional investment management services.

    Wellington Management generally does not share non-public client information with unaffiliated third parties, except as necessary to perform the investment management services it has been hired to provide. For example, Wellington Management may share non-public client information with brokers and custodian banks in order to buy and sell securities and record those purchases and sales accurately. As a general rule, Wellington Management does not engage in joint marketing arrangements with unaffiliated third parties that involve the sharing of non-public information regarding Wellington Management’s clients. Wellington Management does not provide client information to unaffiliated third parties for their own marketing purposes.

    Wellington Management does not disclose your information except as required or permitted by law. In the event that Wellington Management is involved in a merger, acquisition, reorganization or sale of assets, or bankruptcy, your information may be transferred or sold as part of that transaction.

    Security policies
    We use technical, administrative, and procedural measures in an attempt to safeguard your personal and other information from unauthorized access or use. No such measure is ever 100% effective though, so we do not guarantee that your personal and other information will be secure from theft, loss, or unauthorized access or use, and we make no representation as to the reasonableness, efficacy, or appropriateness of the measures we use to safeguard such information. Users are responsible for maintaining the secrecy of their own passwords. If you have reason to believe that your interaction with us is no longer secure (for example, if you feel that the security of any account you might have with us has been compromised), please immediately notify us by contacting your relationship team member.

    Transfer of data to other countries
    Any information you provide to Wellington Management through use of the Site may be stored and processed, transferred between, and accessed from the US and other countries which may not guarantee the same level of protection of personal information as the one in which you reside. However, Wellington Management will handle your personal information in accordance with this Privacy Statement regardless of where your personal information is stored/accessed.

    Changes to Terms of use

    We may revise these Terms from time to time; the most current version will always be at http://www.wellington.com/terms-use. By continuing to access or use the Services after those revisions become effective, you agree to be bound by the revised Terms.

    Effective as of  17 January 2014

This web site uses cookies; by continuing to browse you consent to our cookies usage.
See our policy for more details.

January 2018 | Eugene Khmelnik, Global Industry Analyst

GIA Spotlight Series — Oil

Eugene Khmelnik, who specializes in the oil sector, examines what rising interest rates may mean for the shale industry, which has so far only existed under extremely loose monetary policy. He also outlines where he sees potential areas of opportunity, notably among US exploration and production companies and LPG exporters.

Key points

  • Despite an increase of over 100% since early 2016, the oil price remains within its long-term trading range.
  • Possible triggers for it to break above that range include the impact on shale production of steeper-than-expected rises in US interest rates, as well as geopolitical risks.
  • I see potential opportunities among some US exporters of liquefied petroleum gas and, more broadly, among US exploration and production and midstream companies if the oil price stays around or above current levels.

We believe our GIAs — specialist stock pickers for whom industry research is a career path — are one of Wellington’s key differentiators. Their role is to use fundamental analysis to identify investment opportunities for clients’ portfolios. It is our belief that stock selection based on in-depth knowledge of an industry has the potential to generate strong investment performance over the long term.


How did you come to be an oil analyst?

Directly after completing a bachelor’s degree in finance, I joined Wellington in 2008 as part of the Launch Research Associate program. This two-year rotational program is designed to give graduates a series of placements with different teams around the firm. My first placement was with Karl Bandtel, who then led the oil team. The team needed help and I loved the sector. It was an exciting time, with the start of the shale revolution in North America. I was fortunate enough to be asked to stay on the team and have been able to grow relationships with shale management teams as their companies have evolved.

What attracted you to Wellington?

The firm has a great culture of sharing knowledge. As a younger member of the team, I have constantly benefited from older members passing on their accumulated wisdom. That applies not only to my sector, but equally to the broader financial markets.

My team’s dialogue with our credit analysts has been especially productive. In 2016, oil fell as low as US$29, causing widespread bankruptcies in the sector. It was an excellent example of collaboration, where we, on the equity side, had in-depth knowledge of oil companies’ assets and the credit analysts understood the covenants — the legal agreements between the bond issuers and buyers — and the specific debt metrics. They helped us to better appreciate which companies were likely to break their covenants, while we helped them understand which companies could still make a profit with oil prices so low.


The oil price has been in a steady upward trend since June 2017 and has now more than doubled since its 2016 low. Where do you see it going from here?

It’s hard to predict commodity prices with any precision (Figure 1). And the further out you go, the more difficult it becomes. But, when the market is at an extreme, it is easier to take a position on a commodity price.

Figure 1

Oil price predictions are rarely accurate

To figure out when that is, we look at a range of factors. These include whether capital is leaving the industry, the number of initial public offerings, and the rig count. We also look at high-yield energy spreads. When they rose above 10% in 2008 – 2009 and again in 2016, they signified an extreme. We also look at sentiment — how investors are positioned in energy relative to history and to other sectors.

Currently, the oil price appears rangebound. When prices approach the upper end of the range, short-term projects (such as shale) come on stream to take advantage, putting downward pressure on the price. When prices approach the lower bound, those projects become uneconomical. Oil has probably the highest natural decline rate of any commodity. So the price often doesn’t stay low for long.

What could drive the oil price to break out above this range?

If rising inflation leads to higher interest rates, that could rein in shale production more than the market is expecting. Shale has vast supply at a low cost, and it’s driving the US to become much more energy-independent. But the industry is only 10 years old and has never had to cope with high interest rates. The amount of capital expenditure (capex) on shale — and on energy in general — may prove to be unsustainable.

Unlike much of the rest of the economy, which is service-oriented, energy requires a lot of capital because of its natural decline rates: Oil and gas wells are constantly being depleted. In recent years, energy companies have seen significant flows from the high-yield market and private and public equity. That is starting to change. Markets are requiring these companies to focus more on returns and less on growth, so that they can return some of their cash flow to investors via dividends or buybacks.

It’s good to see greater capital discipline in the sector. However, when interest rates return to more normal levels, the cost of capital for these companies will rise even further. Capital flows from the private equity and high-yield markets may dry up, which could finally take the oil price out of its trading range.

What else could cause a rise in the price?

An alternative driver might be the reintroduction of a geopolitical risk premium. There are several sources of uncertainty currently, including the new ruler in Saudi Arabia, the Trump administration’s stance on Iran, and the instability in Venezuela.

Are there any particular areas of potential opportunity in the market?

It’s important to remember that not every stock is a play on the oil price. For example, the shale revolution has turned the US from a major importer of oil and petroleum products to an exporter. One niche area we’re looking at is tankers for liquefied petroleum gas (LPG), a cheap and abundant by-product of oil and gas drilling. As domestic demand can’t keep up with the supply, it is exported in specialized tankers to places such as China, India, and Latin America. We think exports of LPG products will continue to increase, which should benefit some of these tanker companies.

Over the past 12 months, many US oil stocks have significantly underperformed the oil price. These include not only exploration and production companies, but also midstream master limited partnerships (transportation, storage, and royalties businesses). They could do well if the oil price stays at current levels; it doesn’t need to rise further from here.

How about outside the US?

In Europe, a lot of the oil majors have kept pace with the oil price because shareholders like their focus on capital returns, so we see fewer valuation opportunities there.

The right geological conditions for shale exist in parts of Europe and China, but they are in areas of higher population density than the shale basins of North America. In addition, governments in these countries tend to own the mineral rights. In the US, landowners do, which means they get a royalty. One of the few places outside North America that we are watching closely is Argentina. Several large overseas companies are coming in and doing joint ventures with local businesses.

Do you see any common misconceptions about the market?

We generally find that the market focuses too much on the upside and not enough on downside protection. That’s because most people who invest specifically in energy are looking for a levered play on oil and gas prices, and they will have a target price in mind.

Yet downside and upside risks are asymmetrical: A 20% gain doesn’t make up for a 20% loss. So we prefer to look at ranges for every stock we own. We want to make sure we understand the downside and upside potential as well as possible and then aim to select stocks where the range of projected returns is in our favor, not just stocks with high potential upside.


Explore insights