Globally, the oil and gas industry is holding strong, distributing nearly $213 billion in dividends and $136 billion in buybacks between January 2024 and mid-November 2024. Therefore, fundamentally strong oil stocks, Obsidian Energy Ltd. (OBE), Weatherford International plc (WFRD), and Energy Transfer LP (ET), might be worthy of capitalizing by the end of the year.
Due to sluggish global oil demand, especially from China, and rising production outside the alliance, OPEC+ has postponed the increase in oil output until April. Despite the group's supply cuts, global oil benchmark Brent crude has mostly stayed in a $70 to $80 per barrel range this year.
Additionally, OPEC predicts a 24% rise in global energy demand from 2024 to 2050, with strong medium-term growth in oil consumption expected to hit 112.3 million barrels per day by 2029. Likewise, the IEA forecasts that global natural gas demand will increase by over 2.5% in 2024, with comparable growth anticipated for 2025.
Considering this favorable backdrop, let’s assess the fundamentals of the three Energy - Oil & Gas picks.
Stock #3: Obsidian Energy Ltd. (OBE)
Headquartered in Calgary, Canada, OBE engages in exploring, producing, and developing oil and natural gas properties in Western Canada.
On September 30, OBE revised its 2024 guidance, including the ongoing strong second-half 2024 drilling results, which continue to exceed the company’s initial expectations. The company raised its 2024 production guidance to the range of 37,000 to 37,400 boe/d (midpoint of 37,200 boe/d).
OBE’s forward EV/Sales of 1.13x is 43.9% lower than the industry average of 2.02x. Its forward Price/Sales multiple of 0.70 is 52% lower than the industry average of 1.46.
OBE’s total production rose 20.6% from the year-ago value to 39,714 boe/d during the third quarter that ended September 30, 2024. The company’s net income of CAD 33.20 million ($23.56 million) or CAD 0.42 per share indicates increases of 33.9% and 40% from the previous year’s quarter, respectively.
Furthermore, the company’s funds flow from operations increased 26.1% year-over-year to CAD 124.70 million ($88.49 million).
Analysts expect OBE’s revenue for the fiscal year (ending December 2025) to increase 8.8% year-over-year to $621.51 million, and its EPS is expected to grow 17.5% year-over-year to $4.59 for the same year.
The stock has declined marginally intra-day to close the last trading session at $5.41.
OBE’s POWR Ratings reflect its positive outlook. The stock has an overall rating of B, which translates to 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 Value. It is ranked #10 out of 77 stocks in the Energy - Oil & Gas industry.
For additional OBE’s Momentum, Sentiment, Quality, Stability, and Growth, click here.
Stock #2: Weatherford International plc (WFRD)
WFRD is an energy services company that provides equipment and services for drilling, evaluation, completion, production, and intervention in oil, geothermal, and natural gas wells worldwide. It operates in three segments: Drilling and Evaluation; Well Construction and Completions; and Production and Intervention.
In terms of forward non-GAAP P/E, WFRD is trading at 10.84x, 10.4% lower than the industry average of 12.10x. Further, the stock’s forward EV/EBITDA multiple of 4.65 is 24.8% lower than the 6.19 industry average. And its forward Price/Sales of 1x is lower than the industry average of 1.46x.
On November 7, WFRD was awarded a three-year contract for providing rigless services as part of the reactivation of ADNOC onshore strings. Under the contract, WFRD will deploy multiple intervention solutions, advancing the operational efficiency and reliability of ADNOC’s onshore assets.
WFRD’s total revenues increased 7.3% year-over-year to $1.41 billion for the third quarter that ended September 30, 2024. Its operating income grew 11.5% from the year-ago value to $243 million. Net income attributable to WFRD was $157 million, or $2.06 per share, indicating increases of 27.6% and 24.1% from the prior year’s quarter, respectively.
In addition, the company’s adjusted EBITDA rose 16.4% year-over-year to $355 million. And its adjusted free cash flow rose 34.3% from the prior-year quarter to $184 million.
Analysts expect WFRD’s revenue for the first quarter (ending March 2025) to increase marginally year-over-year to $1.37 billion. The company’s EPS for the same quarter is expected to increase 5.7% year-over-year to $1.59. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
WFRD’s stock has declined 1.4% intra-day to close the last trading session at $76.96.
WFRD’s fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system.
WFRD also has a B grade for Value and Quality. It is ranked #5 in the same industry.
Beyond what is stated above, we’ve also rated WFRD for Momentum, Sentiment, Growth, and Stability. Get all WFRD ratings here.
Stock #1: Energy Transfer LP (ET)
ET operates natural gas transportation pipelines and storage facilities in Texas and Oklahoma, managing around 20,090 miles of interstate pipelines. The company’s strategic network extends across 44 states, connecting key assets in U.S. production basins.
On October 28, ET announced an increase in its quarterly cash distribution to $0.3225 per Energy Transfer common unit ($1.29 on an annualized basis) for the third quarter ended September 30, 2024. This cash distribution per Energy Transfer common unit will be paid on November 19, 2024, which represents a rise of 3.2% compared to the third quarter of 2023.
In terms of forward non-GAAP PEG, ET is trading at 0.90x, 42.7% lower than the industry average of 1.58x. Likewise, the stock’s forward EV/Sales and forward Price/Sales multiples of 1.71 and 0.79 are 15.3% and 46.1% lower than their respective industry averages of 2.02x and 1.46x.
For the fiscal third quarter that ended September 30, 2024, ET’s revenues increased marginally year-over-year to $20.77 billion. Its operating income was reported at $2.18 billion. Additionally, ET’s net income came in at $1.43 billion, or $0.32 per share, increasing 37% and 113.3% year-over-year.
Analysts expect ET’s revenue for the fiscal fourth quarter ending November 2024 to increase 6.1% year-over-year to $21.79 billion. Its EPS for the ongoing quarter is expected to grow 6.5% from the previous year’s period to $0.39.
Shares of ET have surged 23% over the past six months and 43.7% over the past year to close the last trading session at $19.03.
ET’s POWR Ratings reflect bright prospects. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. ET has an A grade for Momentum and a B for Value, Stability, and Sentiment. It is ranked #4 in the same industry.
For additional ET’s Quality and Growth, click here.
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ET shares were trading at $19.02 per share on Friday afternoon, down $0.19 (-0.99%). Year-to-date, ET has gained 49.39%, versus a 28.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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