OPEC and non-OPEC allies, commonly referred to as OPEC+, announced a deep output cut of two million barrels per day from November. This production cut is aimed at stopping oil prices from dropping further. OPEC Secretary-General Haitham Al Ghais said the OPEC+ seeks to provide “security [and] stability to the energy markets.”
Crude oil prices could be set to hit $125 per barrel as Russia is expected to counter a G7 price-cap plan led by the United States. Dominic Schnider, head of commodities at UBS Global Wealth Management, believes this move could pull another one million barrels a day.
Given this backdrop, fundamentally strong oil and gas stocks Marathon Petroleum Corporation (MPC), Valero Energy Corporation (VLO), and PBF Energy Inc. (PBF) might deliver steady gains and could be ideal additions to your portfolio.
Marathon Petroleum Corporation (MPC)
MPC, with its subsidiaries, operates as an integrated downstream energy company. It operates in two segments, Refining & Marketing and Midstream.
On September 21, MPC announced closing its joint venture with Neste Oyj (NTOIY) for the Martinez renewables project. This joint venture reflects MPC’s commitment to providing low carbon-intensity feedstocks to support California’s Low Carbon Fuel Standard goals.
In July, MPC declared a dividend of $0.58 per share on its common stock, which was payable to shareholders on September 12. This reflects upon the cash generation ability of the company.
For the second quarter that ended June 30, 2022, MPC’s total revenue and other income increased 81.8% year-over-year to $54.24 billion. Its income from continuing operations increased 736% year-over-year to $8.33 billion, while its net income per share from continuing operations rose 2,333.3% from the prior-year quarter to $10.95. Net income attributable to MPC stood at $5.87 billion.
The consensus EPS estimate of $6.63 for the fiscal third quarter that ended September represents an 807.8% improvement year-over-year. The consensus revenue estimate of $40.08 billion for the same quarter represents a 22.9% increase from the same period last year. Moreover, MPC has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
MPC has gained 61.6% year-to-date to close its last trading session at $103.43. The stock has gained 23.7% over the past three months.
MPC’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.
MPC has an A grade for Growth, Momentum, and Quality. It is ranked #7 out of 94 stocks in the B-rated Energy – Oil & Gas industry. To see additional POWR Ratings for Value, Stability, and Sentiment, click here.
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 transaction, combined with debt reduction and refinancing transactions completed earlier, collectively reduced VLO’s debt by approximately $3.60 billion.
On July 21, VLO declared a regular quarterly dividend on the common stock of $0.98 per share, which was payable to shareholders on September 1. This reflects on the company’s ability to pay back its shareholders.
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.
VLO’s EPS is estimated to rise 490.8% year-over-year to $7.21 for the fiscal third quarter that ended September 2022. Similarly, its revenue is expected to increase 51.9% from the same period last year to $44.78 billion for the same quarter. Additionally, VLO has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 46% year-to-date to close its last trading session at $109.69.
This promising prospect is reflected in VLO’s POWR Ratings. VLO has an overall A rating which translates to a Strong Buy in our proprietary rating system. It is also rated an A in Growth and Momentum and a B in Value and Quality. VLO is ranked #7 in the same industry.
Beyond what we’ve stated above, we have also given VLO grades for Stability and Sentiment. Get all VLO ratings here.
PBF Energy Inc. (PBF)
PBF refines and supplies petroleum products. The company operates in two segments, Refining, and Logistics, producing gasoline, ultra-low-sulfur diesel, heating oil, diesel fuel, jet fuel, lubricants, petrochemicals, asphalt, unbranded transportation fuels, and other petroleum products.
On July 28, PBF and PBF Logistics LP (PBFX) announced a definitive agreement and plan of merger to acquire all the outstanding common units representing limited partner interests of PBFX. This transaction is expected to simplify the company’s corporate structure and eliminate the costs of running a separate public company.
Earlier in July, PBF announced that its indirect subsidiary PBF Holding Company LLC had fully redeemed all of the $1.25 billion in aggregate principal amount outstanding of its 9.25% Senior Secured Notes due 2025 issued by PBF Holding and PBF Finance Corporation at a redemption price of 104.625%.
PBF’s revenues came in at $14.08 billion for the second quarter that ended June 30, representing a 104.1% year-over-year growth. Its adjusted EBITDA grew 28,537.3% from the prior-year quarter to $1.92 billion, while its net income rose 1,668% from the same period last year to $1.24 billion. EPS increased by 2,374.4% from the prior-year period to $9.65.
Analysts expect PBF’s revenue for the third quarter that ended September 2022 to be $10.13 billion, indicating a 41% year-over-year growth. The company’s EPS for the same quarter is expected to increase 5,432% from the prior-year quarter to $6.64.
PBF has gained 162.6% over the past year to close its last trading session at $37.87. The stock has gained 192% year-to-date.
It is no surprise that PBF has an overall A rating, which translates to Strong Buy in our POWR Rating system. The stock also has an A grade for Growth, Value, and Momentum and a B for Quality. It is ranked #3 in the same industry.
Click here for additional POWR Rating grades for Stability and Sentiment for PBF.
MPC shares were trading at $105.24 per share on Wednesday afternoon, up $1.81 (+1.75%). Year-to-date, MPC has gained 67.69%, versus a -23.88% 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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