After continuous restrained supplies and escalating economic tensions through 2024, 2025 is slowing opening up for the energy market. Amid the ongoing developments and growing needs, the oil market is poised to flourish strongly.
Given the industry’s tailwinds, it could be wise to invest in fundamentally sound oil & gas stocks Obsidian Energy Ltd. (OBE), Suncor Energy Inc. (SU), and VAALCO Energy, Inc. (EGY) benefiting from rising energy prices.
After hovering lower for the past months, Brent crude oil prices showcased an uptrend through January 2025, where oil prices reached over $80 in mid-January. Further, in the near future, oil prices are likely to be navigated by U.S. President Donald Trump's planned tariff impositions and pledge to raise U.S. oil production.
Further, as per the Short-Term Energy Outlook of EIA, global oil production is likely to grow at a rapid pace as OPEC+ plans to unwind production cuts from April, followed by strong growth in oil production outside of OPEC+. EIA expects global production of liquid fuels to increase by 1.8 million barrels per day (b/d) in 2025 and 1.5 million b/d in 2026.
Also, U.S. crude oil production is forecasted to increase to 13.5 million b/d in 2025. And crude oil production is projected to grow lower than 1% in 2026, averaging 13.6 million b/d. Global consumption of liquid fuels is anticipated to increase by 1.3 million b/d in 2025 and 1.1 million b/d in 2026, driven by solid consumption growth in non-OECD countries.
With these encouraging trends in mind, let’s delve into the fundamentals of the three Energy – Oil & Gas stock picks, beginning with the third choice.
Stock #3: Obsidian Energy Ltd. (OBE)
Headquartered in Calgary, Canada, OBE is engaged in the exploration, production, and development of oil and natural gas properties.
In terms of forward non-GAAP P/E, OBE is trading at 5.28x, 55.1% lower than the industry average of 11.76x. Likewise, the stock’s forward EV/EBITDA multiple of 1.96 is 67.3% lower than the industry average of 6. Also, its forward Price/Sales of 0.69x is 52.4% lower than the industry average of 1.45x.
During the third quarter that ended September 30, 2024, OBE’s fund flow from operations increased 26.1% and 32.8% year-over-year to CAD 124.70 million ($87.19 million) and CAD 1.58. Also, its net income stood at CAD 33.20 million ($23.21 million) and CAD 0.42 per share, up 33.9% and 40% year-over-year, respectively.
Street expects OBE’s revenue and EPS for the fiscal year (ending December 2025) to increase 4.6% and 18.9% year-over-year to $582.79 million and $4.48, respectively.
Over the past month, OBE’s stock has declined 12.7% to close the last trading session at $5.18.
OBE’s POWR Ratings reflect its bright outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
OBE has a B grade for Growth and Value. It is ranked #10 out of 75 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have OBE’s ratings for Sentiment, Momentum, Quality, and Stability. Get all OBE ratings here.
Stock #2: Suncor Energy Inc. (SU)
Based in Calgary, Canada, SU is an integrated energy company operating internationally. The company operates through Oil Sands; Exploration and Production; and Refining and Marketing segments. It explores, develops, and produces bitumen, synthetic crude oil, and related products and also engages in oil sands mining.
On February 6, 2025, SU’s Board of Directors approved a quarterly dividend of $0.57 per share on its common shares. The dividend is payable on March 25, 2025, to shareholders of record at the close of business on March 4, 2025.
SU has paid dividends for four consecutive years. The stock pays a $1.59 per share dividend annually, which translates to a 4.11% yield on the current price. Its four-year average dividend yield is 3.97%. Also, the company’s dividend payments have grown at a CAGR of 24.5% over the past three years.
During the fourth quarter that ended December 31, 2024, SU reported net earnings of CAD 818 million ($571.96 million) and CAD 0.65 per common share, respectively. Also, the company’s adjusted funds from operations were CAD 3.49 billion ($2.44 billion) or CAD 2.78 per common share.
For the quarter ending March 2025, SU’s revenue is expected to increase 18.5% year-over-year to $10.82 billion, and its EPS is expected to be $0.88, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of SU have gained 1.6% over the past month and 20.6% over the past year to close the last trading session at $38.75.
SU’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality. It also has a B grade for Momentum and Stability. Within the same industry, SU is ranked #9 of 75 stocks.
Click here to access additional SU ratings for Value, Growth, and Sentiment.
Stock #1: VAALCO Energy, Inc. (EGY)
EGY is an independent energy company that engages in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids internationally. It holds a 58.8% interest in the Etame production, and it also owns a 100% interest in the Eastern Desert.
On January 21, 2025, EGY announced record production and sales volumes for 2024. The company recorded full-year 2024 sales volumes of 24,100 to 24,600 working interest (WI) (BOEPD) at the midpoint of its provided guidance range of 23,500 to 25,100 WI BOEPD.
It also generated fourth-quarter 2024 sales volumes of about 23,600 to 24,000 WI BOEPD or 19,100 to 19,500 NRI BOEPD.
On November 11, 2024, EGY declared its fourth quarter 2024 cash dividend of $0.0625 per share of common stock. The dividend was paid on December 20, 2024, to stockholders of record at the close of business on November 22, 2024. EGY pays an annual dividend of $0.25, which translates to a yield of 6.10% at the current share price. Its four-year average dividend yield is 2.66%.
For the third quarter that ended September 30, 2024, EGY’s total net revenues increased 20.7% year-over-year to $140.33 million. Its operating income grew 24% from the year-ago value to $44.08 million. The company’s adjusted net income came in at $7.93 million or $0.08 per share, up 6.2% and 14.3% over the prior-year quarter, respectively.
As per the financial and operating performance guidance for the full fiscal year 2024, PAMC coal sales volume is expected between 25 - 27 million tons. PAMC average realized coal revenue per ton sold expectation of $62.50-$66.50. Also, the company projects that the Itmann Mining Complex coal sales volume will be 600-800 thousand tons.
Analysts expect EGY’s revenue for the first quarter (ending March 2025) to increase 1.9% year-over-year to $102.10 million. For the same period, the company’s EPS is expected to be $0.07. Also, the company has topped the consensus revenue and EPS estimates in three of the four trailing quarters.
EGY’s stock has plunged 1.7% over the past year to close the last trading session at $4.10.
EGY’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
EGY has an A grade for Quality and a B for Value. It is ranked #7 among 75 stocks in the Energy – Oil & Gas industry.
To access EGY’s POWR ratings (Momentum, Stability, Sentiment, and Growth), click here.
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SU shares were trading at $39.54 per share on Monday afternoon, up $0.79 (+2.04%). Year-to-date, SU has gained 10.82%, versus a 3.23% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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