In the next OPEC+ meeting, Russia will likely suggest cutting the group’s collective output by one million barrels per day. As one of the largest members of the group, the country’s decision is expected to hold weight. This move can push Brent above the $90 per barrel mark.
Moreover, JPMorgan Chase & Co. (JPM) recently forecasted that the Brent crude prices could head toward $100 a barrel as supply grows tighter in the near term. Moreover, global oil demand is expected to rebound by about 1.50 million a barrel in the last quarter of this year, especially due to the increasing switch toward oil amid the natural gas crunch.
Given this backdrop, fundamentally strong energy stocks Valero Energy Corporation (VLO), Marathon Oil Corporation (MRO), and APA Corporation (APA) might be solid long-term investments.
Valero Energy Corporation (VLO)
VLO manufactures, markets, and sells transportation fuels and petrochemical products globally. The company operates through three segments: Refining; Renewable Diesel; and Ethanol.
On September 26, VLO announced that it had reduced its debt by approximately $1.25 billion this month. This transaction, combined with debt reduction and refinancing transactions completed in the second half of 2021 and the first half of 2022, collectively reduced Valero’s debt by approximately $3.60 billion.
On July 21, VLO declared a regular quarterly dividend on its common stock of $0.98 per share. This dividend was payable to shareholders on September 1. This reflects upon the cash generation ability of the company.
VLO’s revenue increased 86.1% year-over-year to $51.64 billion in the second quarter that ended June 30. Its operating income grew 1,121.8% from the year-ago value to $6.22 billion, while adjusted net income attributable to VLO stockholders improved 1,672.7% year-over-year to $4.61 billion. The company’s adjusted earnings per common share rose 1,703.2% from its year-ago value to $11.36.
The consensus EPS estimate of $7.20 for the fiscal third quarter ending September 2022 indicates a 489.9% improvement year-over-year. Revenue is expected to increase 51.9% from the same period last year to $44.85 billion. Additionally, VLO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 42.9% over the past year and 34.7% year-to-date to close its last trading session at $101.17.
VLO’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VLO is rated an A in Growth and Momentum and a B in Value and Quality. Within the B-rated Energy – Oil & Gas industry, it is ranked #4 out of 94 stocks.
To see additional POWR Ratings for Stability and Sentiment for VLO, click here.
Marathon Oil Corporation (MRO)
MRO is an independent exploration and production company operating internationally. The company explores, produces, and sells crude oil and natural gas. It also produces liquefied natural gas and methanol.
On July 27, MRO declared a dividend of eight cents per share on its common stock. The dividend was payable to stockholders on September 12. This reflects the good liquidity position of the company.
MRO’s total revenues and other income came in at $2.30 billion for the second quarter that ended June 30, representing a 101.4% year-over-year growth. Its income from operations grew 1,132.4% from the prior-year quarter to $1.29 billion, while its adjusted net income rose 439.9% from the same period last year to $934 million. The company’s adjusted net income per share increased 500% from the prior-year period to $1.32.
Analysts expect MRO’s revenue for the third quarter ending September 2022 to be $2.06 billion, indicating a 41.6% year-over-year growth. The company’s EPS for the same quarter is expected to increase 222.3% from the prior-year quarter to $1.26. Additionally, MRO has an impressive record of topping its consensus EPS estimates in each of the trailing four quarters.
MRO has gained 56.6% over the past year and 30.3% year-to-date to close its last trading session at $21.39.
It’s no surprise that the company has an overall rating of B, which translates to Buy in our proprietary rating system.
MRO has an A grade for Momentum and Quality and a B for Growth. It is ranked #35 in the same industry.
Beyond what we’ve stated above, we have also given MRO grades for Value, Stability, and Sentiment. Get all the MRO ratings here.
APA Corporation (APA)
APA explores, develops, and produces oil and gas properties. It has operations in the United States, Egypt, and the United Kingdom, as well as exploration activities in offshore Suriname.
On September 22, APA announced the engagement of GHD, a company that implements and verifies sustainability projects for third-party emission verification. This engagement is expected to help the company eliminate at least one million tons of CO2e by the end of 2024.
On September 14, APA announced an increase in the company’s dividend on common shares from an annualized rate of 50 cents per share to $1.00 per share. The next quarterly dividend is payable on November 22 at a rate of 25 cents per share on its common stock.
On the same day, APA’s board of directors also approved 40 million shares of additional share repurchase authorization. This reflects upon its shareholder return ability.
APA’s total revenue and other came in at $3.05 billion for the second quarter of 2022 ended June 30, representing a 71.3% year-over-year growth. Its adjusted EBITDAX rose 93.6% year-over-year to $1.96 billion, while adjusted earnings grew 204.9% from the prior-year quarter to $811 million. The company’s adjusted EPS increased 238.6% from the prior-year period to $2.37.
Street expects APA’s revenue to grow 55.5% year-over-year for the quarter ending September 2022 to $2.57 billion. The company’s EPS for the same quarter is expected to increase 136.7% from the prior-year quarter to $2.32.
APA has gained 40.5% over the past year and 21.5% year-to-date to close its last trading session at $32.68. It has gained 2.6% intraday.
The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
APA is rated an A in Momentum and Quality and a B in Growth and Value. Within the same industry, it is ranked #7.
In addition to the POWR Ratings grades highlighted, you can see the APA grades for Stability and Sentiment here.
VLO shares were trading at $107.74 per share on Wednesday afternoon, up $6.57 (+6.49%). Year-to-date, VLO has gained 47.55%, versus a -21.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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