Despite fluctuating crude oil prices influenced by geopolitical tensions, recent stability and a monthly gain in January highlight the industry’s resilience. So, investors could consider investing in quality oil and gas stocks Antero Midstream Corporation (AM), NuStar Energy L.P. (NS), Dorchester Minerals, L.P. (DMLP), Summit Midstream Partners, LP (SMLP), and NGL Energy Partners LP (NGL) showing potential bullish momentum.
Oil prices remained stable on Monday, recovering from recent declines triggered by Washington's commitment to launch additional strikes on Iran-backed groups in the Middle East. The impact was further compounded by a robust U.S. job report, which dampened expectations of immediate rate cuts.
Moreover, oil prices recorded their first monthly gain in January since September amid escalating tensions between the U.S. and Iran. U.S. crude and Brent, the global benchmark, saw increases of 5.9% and 6.1%, respectively, in January.
Despite concerns over Chinese factory data, monthly gains were attributed to stronger-than-expected U.S. growth, disruptions to U.S. crude supplies due to winter storms, and Beijing's economic stimulus efforts.
Besides, natural gas is a lucrative sector for the U.S., especially with increased exports following Russia's invasion of Ukraine and Europe's shift away from Russian gas. U.S. gas companies are capitalizing on this opportunity by compressing or freezing gas at export terminals and transporting it in large tankers across the ocean.
In just eight years, the United States has transformed from minimal gas exports to becoming the world's top supplier, marking a significant shift that benefits oil and gas companies and enhances American influence globally.
Furthermore, The U.S. Energy Information Administration (EIA) predicts Brent crude oil prices to average $82/barrel in 2024 and $79/barrel in 2025, close to 2023 averages. OPEC+ production restraint, with expected crude oil production averaging 36.40 million barrels per day in 2024, contributes to price stability.
With these favorable trends in mind, let's delve into the fundamentals of the five MLPs – Oil & Gas stock picks, beginning with the fifth choice.
Stock #5: Antero Midstream Corporation (AM)
AM owns, operates, and develops midstream energy infrastructure in the Appalachian Basin. The company operates through Gathering and Processing; and Water Handling segments.
AM’s total revenue increased 14.2% year-over-year to $263.84 million during the third quarter that ended September 30, 2023. Its operating income was $162.31 million, up 17.8% from the prior year’s quarter. The company’s net income and comprehensive income grew 16.4% year-over-year to $97.82 million.
The company’s net income per share rose 17.6% from the year-ago value to $0.20. As of September 30, 2023, its total current assets stood at $95.53 million, compared to $88.99 million as of December 31, 2022.
Analysts expect AM’s revenue and EPS to increase 6.5% and 16.3% year-over-year to $257.32 million and $0.20, respectively for the fourth quarter (ended December 2023). Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters, which is remarkable.
AM’s stock has surged 16.2% over the past nine months and 14% over the past year to close the last trading session at $12.24.
AM’s robust outlook is reflected in its POWR Ratings. 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, each weighted to an optimal degree.
The stock has a B grade for Stability, Quality, and Momentum. It is ranked #14 out of 25 stocks in the A-rated MLPs – Oil & Gas industry.
Click here to access AM’s additional Value, Sentiment, and Growth ratings.
Stock #4: NuStar Energy L.P. (NS)
NS engages in the transportation terminalling and storage of petroleum products and renewable fuels, and transportation of anhydrous ammonia in the United States and internationally. It operates through Pipeline; Storage; and Fuels Marketing segments.
During the third quarter that ended September 30, 2023, NS’ service revenues rose 4.5% year-over-year to $289.95 million. Its operating income grew 3.1% from the year-ago quarter to $115.30 million. Also, the company’s adjusted EBITDA marginally increased from the prior year’s quarter to $179.75 million.
The consensus revenue estimate of $1.67 billion for the fiscal year 2024 reflects a 3.3% year-over-year improvement. The consensus EPS estimate of $1.27 for the same year exhibits a 46.3% rise from the previous year.
Shares of NS have gained 32.4% over the past year to close the last trading session at $22.64.
NS’ bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
NS has a B grade for Growth and Momentum. It is ranked #13 in the same industry.
To access the additional NS ratings (Value, Stability, Sentiment, and Quality), click here.
Stock #3: Dorchester Minerals, L.P. (DMLP)
DMLP acquires, owns, and administrates producing and non-producing natural gas and crude oil royalty, net profit, and leasehold interests.
In the third quarter that ended September 30, DMLP reported total operating revenues of $42.59 million. Its operating revenues from royalties and net profits interest grew 6.7% and 101.4% year-over-year to $35.79 million and $6.03 million, respectively. The company’s net income came in at $29.46 million, or $0.73 per common unit, respectively.
Shares of DMLP have gained 8.54% over the past three months and 6.8% over the past year to close the last trading session at $31.
DMLP’s POWR Ratings reflect its promising prospects. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.
The stock has an A grade for Quality and a B for Momentum. DMLP is ranked #12 in the same industry.
In addition to the POWR Ratings stated above, one can access DMLP’s Value, Growth, Sentiment, and Stability ratings here.
Stock #2: Summit Midstream Partners, LP (SMLP)
SMLP owns, develops, and operates midstream energy infrastructure assets, primarily in shale formations. The company delivers natural gas gathering, compression, treating, processing services, crude oil, and produced water gathering services.
During the third quarter that ended September 30, 2023, SMLP’s total revenues increased 36.7% year-over-year to $121.19 million. Its net income came in at $3.87 million, compared to a loss of $7.79 million in the prior year’s quarter. Also, the company’s adjusted EBITDA rose 33% from the preceding year’s period to $72.79 million.
As of September 30, 2023, SMLP’s cash and cash equivalents amounted to $17.10 million, compared to $11.81 million as of December 31, 2022.
SMLP’s revenue is expected to rise 6.3% year-over-year to $418.10 million in the fiscal year 2024.
The stock has gained 8.3% over the past nine months to close the last trading session at $16.33.
SMLP’s optimistic outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
SMLP has a B grade for Growth and Momentum. It has ranked #11 in the same industry.
Click here to access additional SMLP ratings for Value, Stability, Sentiment, and Quality.
Stock #1: NGL Energy Partners LP (NGL)
NGL engages in the transportation, storage, blending, and marketing of crude oil, natural gas liquids, refined products/renewables, and water solutions. The company operates in Water Solutions; Crude Oil Logistics; and Liquids Logistics segments.
In the fiscal second quarter, which ended September 30, 2023, NGL generated total revenues of $1.84 billion. Its operating income rose 25.1% year-over-year to $86.03 million. Its net income attributable to NGL rose 698.5% year-over-year to $28.03 million. The company’s adjusted EBITDA increased 23.9% over the prior-year quarter to $176.21 million.
Street expects NGL’s EPS to rise tremendously year-over-year to $0.30 in the fiscal year 2024.
Over the past year, the stock has returned 252.7% to close the last trading session at $5.82.
NGL’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value and Momentum. Within the same industry, it is ranked #10.
To see NGL’s additional Growth, Stability, Sentiment, and Quality ratings, click here.
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AM shares were trading at $12.10 per share on Monday morning, down $0.14 (-1.14%). Year-to-date, AM has declined -1.64%, versus a 3.51% 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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