Oil prices hit seven-year highs on January 18 due to supply concerns and rising political tensions in Europe and the Middle East. With the world bracing for a potential Russian invasion of Ukraine, oil and gas prices could rise worldwide. This because Russia is the world’s second-largest oil exporter, while Ukraine acts as a key transit hub for crude oil and natural gas supply from Russia to Europe.
According to a recent Goldman Sachs report, oil prices could hit more than $100 per barrel in 2022 and increase further in 2023. Oil refiners are expected to benefit from higher crude oil prices pushing their profit margins up significantly. This optimistic sentiment is evident in the VanEck Vectors Oil Refiners ETF’s (CRAK) 11.3% returns over the past month.
Given this backdrop, we think that it could be wise to scoop up the shares of fundamentally sound refining stocks TotalEnergies SE (TTE), ConocoPhillips (COP), and China Petroleum & Chemical Corporation (SNP).
TotalEnergies SE (TTE)
Headquartered in Paris, France, TTE is an integrated oil and gas company worldwide. The company operates through four segments: Exploration & Production; Integrated Gas, Renewables & Power; Refining & Chemicals; and Marketing & Services.
On Dec. 21, 2021, TTE launched the largest battery-based energy storage facility in France. Vincent Stoquart, Senior Vice President Renewables at TTE, said, “We are proud of the commissioning of the largest storage site in France and to be able to support RTE, the grid operator, in guaranteeing the stability of the grid and thus enabling the increased development of renewable energies.”
TTE’s sales increased 65.1% year-over-year to $54.73 billion for its fiscal year 2021 third quarter. The company’s consolidated net income came in at $4.75 billion, up 2,525.4% year-over-year. And its EPS came in at $1.71, up 4,175% year-over-year.
Analysts expect TTE’s revenue to increase 11.1% year-over-year to $202.78 billion in fiscal 2022. Its EPS is estimated to grow 13.2% year-over-year to $7.05 in 2022. It surpassed the EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 26.2% in price to close yesterday’s trading session at $57.12.
TTE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
TTE has an A grade for Momentum and a B grade for Growth, Stability, and Sentiment. Within the B-Rated Energy - Oil & Gas industry, it is ranked #4 of 77 stocks. Click here to see the additional POWR Ratings for TTE (Value and Quality).
ConocoPhillips (COP)
COP explores, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide. The Houston, Tex.-based company maintains operations and activities across 14 countries, with approximately 9,900 employees.
On Dec. 1, 2021, COP completed its acquisition of Shell Enterprises LLC’s prolific Delaware basin position for $9.5 billion in cash. Ryan Lance, chairman and CEO stated, “We believe the addition of these high-quality assets improves our underlying business drivers, expands our cash from operations, enhances our ability to deliver higher returns on and of capital, and lowers our average GHG intensity.”
For its fiscal year 2021, third quarter, COP’s total revenues and other income increased 165.2% year-over-year to $11.62 billion. Its net income came in at $2.38 billion, versus a $450 million loss in the previous period. Also, its EPS was $1.78, compared to a $0.42 loss.
COP’s revenue is expected to be $50.01 billion in fiscal 2022, representing an 11.7% year-over-year rise. The company’s EPS is expected to increase 35.3% year-over-year to $7.98 in 2022. In addition, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 88.8% in price to close yesterday’s trading session at $85.63.
It is no surprise that COP has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum and a B grade for Growth, Sentiment, and Quality. COP is ranked #9 in the Energy - Oil & Gas industry. Click here to see the additional POWR Ratings for COP (Value and Stability).
China Petroleum & Chemical Corporation (SNP)
Headquartered in Beijing, the People’s Republic of China, SNP is an energy and chemical company that engages in oil, gas, and chemical operations. It operates through five segments: Exploration and Production; Refining; Marketing and Distribution; Chemicals; and Corporate and Others.
On Nov. 4, 2021, SNP signed a 20-year liquified natural gas (LNG) contract with U.S. Venture Global LNG to purchase 4 million tons of LNG per year. Ma Yongsheng, president of SNP, said, “The LNG contract with Venture Global LNG reflects the two companies’ high consensus on supporting the global energy transformation and realizing the ‘dual carbon’ goals of reaching peak carbon and achieving carbon neutrality.”
SNP’s net cash flow from operating activities came in at RMB 115.72 billion ($18.25 billion) for the nine months ended Sept. 30, 2021, up 37.4% year-over-year. Its net profit was RMB 58.72 billion ($9.26 billion), versus a RMB 10.24 billion ($1.61 billion) loss in the year-ago period. And its EPS was RMB 0.495, up 155.2% year-over-year.
For its fiscal year 2022, SNP’s revenue is expected to increase 12.8% year-over-year to $482.25 billion. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 13.3% to close yesterday’s trading session at $52.18.
Under POWR Ratings, SNP has an A grade for Momentum and a B grade for Stability. It is ranked #43 in the Energy - Oil & Gas industry. Click here to see the additional POWR Ratings for SNP (Growth, Value, Sentiment, and Quality).
TTE shares were trading at $55.89 per share on Friday afternoon, down $1.23 (-2.15%). Year-to-date, TTE has gained 13.00%, versus a -6.91% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
3 Refining Stocks to Buy to Profit from Rising Gas Prices StockNews.com
