The global oil and gas market remains a vital contributor to the world economy and is driven by increasing demand, technological advancements, and strategic geographical reserves. Thus, investors could consider investing in top oil and gas stocks Plains All American Pipeline, L.P. (PAA), CSI Compressco LP (CCLP), and Enterprise Products Partners L.P. (EPD).
Oil prices remained relatively stable on Friday and are poised for weekly gains amid ongoing tensions in the Middle East following Israel's rejection of a ceasefire proposal from Hamas. The persistent tensions have kept oil prices elevated, with both Brent and WTI set to achieve nearly 6% gains for the week.
Moreover, the U.S. Energy Information Administration (EIA) raised its forecast for U.S. natural gas consumption in the first quarter of 2024 by 5%, reaching record levels of 118 Bcf/d in January.
Besides, this year, Brent crude oil prices are forecasted to average $82/b, remaining relatively stable through 2025 with an average of $79/b. At the same time, the global oil and gas market is estimated at $7.63 trillion this year and is anticipated to grow at a CAGR of 5.2% to reach $9.35 trillion by 2028.
On top of it, the oil and gas infrastructure market is witnessing growth driven by technological advancements and significant research efforts, with increasing investments in lease equipment and surface design. The global oil and gas infrastructure market is expanding at a notable CAGR of 6.4% to reach around $1.23 trillion by 2032.
Considering these conducive trends, let’s examine the fundamentals of three MLPs - Oil & Gas stock picks, beginning with the third one.
Stock #3: Plains All American Pipeline, L.P. (PAA)
PAA operates pipelines, gathering systems, and storage facilities for the transportation of crude oil and natural gas liquids. Also, the company engages in fractionation, terminalling, and merchant activities related to natural gas liquids, including ethane, propane, and butane.
On January 8, 2024, PAA declared a regular quarterly dividend of $0.3175 per common share, payable on February 14, 2024. The company pays $1.27 annually, which translates to a yield of 8.26% on the prevailing price level.
Its four-year average dividend yield is 9.03%. The company has raised its dividend payouts at a CAGR of 15.9% over the past three years. Moreover, the company boasts a 21-year record for consecutive years of dividend payments.
In the third quarter that ended September 30, 2023, PAA’s revenues and net income stood at $12.07 billion and $279 million, respectively. Adjusted EBITDA attributable to PAA rose 6.3% from the prior-year quarter to $662 million. Moreover, it reported adjusted net income per common unit of $0.35, up 6.1% year-over-year.
For the fiscal year 2023, the company expects its adjusted EBITDA to be in the range of $2.60 billion to $2.65 billion.
PAA’s revenue and EPS are expected to grow 6.2% and 7% year-over-year to $13.75 billion and $0.35, respectively, for the fiscal fourth quarter ended December 2023. The company surpassed the EPS estimates in three of the trailing four quarters, which is notable.
Its shares have gained 21.1% over the past nine months to close the last trading session at $15.35.
PAA’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, equating 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.
PAA has a B grade for Growth, Value, and Momentum. Within the A-rated MLPs - Oil & Gas industry, it is ranked #13 among 25 stocks.
To see PAA’s additional POWR Ratings for Stability, Sentiment, and Quality, click here.
Stock #2: CSI Compressco LP (CCLP)
CCLP provides contract services for natural gas compression and treating globally, offering a range of compressor packages and equipment for natural gas production, transmission, and processing. In addition, the company offers equipment leasing, installation, maintenance, and parts sales.
On January 18, 2024, CCLP declared a quarterly cash distribution of $0.01 per outstanding common unit, payable on February 14, 2024. The company pays $0.04 annually, which translates to a yield of 2.01% on the prevailing price level. Its four-year average dividend yield is 3.38%. Moreover, the company boasts a 12-year record for consecutive years of dividend payments.
During the third quarter, which ended September 30, 2023, CCLP’s total revenues grew 5.1% year-over-year to $99.71 million. The company's adjusted EBITDA rose 13.6% from the previous-year quarter to $33.84 million. It generated a free cash flow of $22.95 million, respectively.
CCLP’s shares have gained 69.2% over the past nine months and 63.6% over the past six months to close the last trading session at $1.98. It gained 2.6% intraday.
CCLP’s POWR Ratings reflect its robust prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
CCLP has an A grade for Momentum and a B for Growth, Stability, and Sentiment. Within the same industry, it is ranked #10.
In addition to the POWR Ratings stated above, one can access CCLP’s additional Value and Quality ratings here.
Stock #1: Enterprise Products Partners L.P. (EPD)
EPD offers midstream energy services worldwide, including natural gas processing, NGL fractionation, crude oil transportation, and petrochemical marketing. With extensive pipeline networks and storage facilities, the company serves producers and consumers across various energy sectors.
On January 8, 2024, EPD declared a quarterly cash distribution of $0.515 per unit per unit, payable on February 14, 2024. The company pays $2.01 annually, which translates to a yield of 7.64% on the prevailing price level. Its four-year average dividend yield is 8.09%.
The company has raised its dividend payouts at a CAGR of 4% and 3.1% over the past three and five years, respectively. Moreover, the company boasts a 25-year record for consecutive years of dividend growth.
In the fourth quarter, which ended December 31, 2023, EPD’s revenues increased 7.1% year-over-year to $14.62 billion. The company's net income and adjusted EBITDA grew 12.8% and 5.2% from the prior-year quarter to $1.60 billion and $2.50 billion, respectively. Its adjusted cash flow from operations rose 5.6% from the previous-year quarter to $2.22 billion.
Analysts expect EPD’s revenue and EPS to grow 3.7% and 5.8% year-over-year to $51.58 billion and $2.68, respectively, for the fiscal year ending December 2024. The stock has gained 3.5% over the past nine months to close the last trading session at $26.25.
EPD’s optimistic fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
EPD has a B grade for Growth, Value, Momentum, Stability, and Sentiment. Within the same industry, it is ranked #2.
Click here for EPD’s additional Quality ratings.
What To Do Next?
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EPD shares were trading at $26.19 per share on Friday morning, down $0.06 (-0.23%). Year-to-date, EPD has gained 1.29%, versus a 5.11% 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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