The European Union leaders on Monday agreed to ban 90% of Russian crude oil by the end of this year as a part of their sanctions against the country in response to its invasion of Ukraine. The move drove oil prices higher. Although prices eased after OPEC’s de-facto leader Saudi Arabia signaled an increase in oil supply if Russian output declines significantly due to the sanctions, it made no outright promise.
Meanwhile, U.S. drivers are paying record-high prices for gasoline. There are a number of factors beside the geopolitical conflict that are driving prices higher. These factors include the lifting of Chinese lockdowns in major cities such as Shanghai and less oil and gas from other sources, which might keep oil prices elevated.
Given this backdrop, the stocks of oil and gas companies Suncor Energy Inc. (SU), ConocoPhillips (COP), Occidental Petroleum Corporation (OXY), Cenovus Energy Inc. (CVE), and Energy Transfer LP (ET) have gained significant momentum and may rise further. These stocks have outperformed the S&P 500’s 2.4% decline over the past year and 14% year-to-date. Hence, we think these stocks might be solid bets now.
Suncor Energy Inc. (SU)
SU, headquartered in Calgary, Canada, is an integrated energy company that is focused primarily on developing petroleum resource basins in Canada’s Athabasca oil sands. The company explores for, acquires, produces, and transports crude oil in Canadian and in the international markets.
On May 31, SU announced that, together with joint venture partners, it plans to restart the West White Rose project. The company intends to increase its ownership of the White Rose asset. This should bolster the company’s operational capability.
On April 4, SU announced that it would focus on hydrogen and renewable fuels to progress toward its objective of being a net-zero company by 2050. The company expects to drive shareholder returns over a long period and meet its emission targets through this venture.
For its first fiscal quarter, ended March 31, SU’s revenues and other income increased 56.3% year-over-year to CAD13.50 billion ($10.67 billion). Its net earnings rose 259.2% from the prior-year quarter to CAD2.95 billion ($2.33 billion). And its net earnings per common share improved 281.5% from the same period the prior year to CAD2.06.
The $1.77 consensus EPS estimate for the quarter ending June 30, 2022, indicates a 365.8% year-over-year increase. Likewise, the $10.99 billion consensus revenue estimate for the same quarter reflects a 52.9% improvement from the prior-year period.
The stock has gained 67% in price over the past year and 63.6% year-to-date to close yesterday’s trading session at $40.94. It is currently trading above its 50-day and 200-day moving averages of $35.18 and $27.52, respectively.
SU’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
SU has a Momentum and Quality grade of A and a Growth grade of B. In the 102-stock Energy – Oil & Gas industry, it is ranked #25. The industry is rated B.
Click here to see the additional POWR Ratings for SU (Value, Stability, and Sentiment).
ConocoPhillips (COP)
COP in Houston, Tex., engages in the exploration, production, transportation, and marketing of crude oil, bitumen, natural gas, and natural gas liquids (NGLs). The company’s portfolio comprises conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands, and other operations.
On March 3, COP announced that it had completed the sale of its subsidiary that owned its 54% interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and a 35% shareholding interest in the Transasia Pipeline Company to MedcoEnergi for $1.36 billion. The company intends to focus on low-cost supply opportunities after the disposition.
On February 18, COP announced that it had purchased an additional 10% shareholding interest in Australia Pacific LNG (APLNG) from Origin Energy for $1.65 billion through its Australian subsidiary. The purchase is intended to further diversify the company’s product portfolio and decrease its aggregate decline rate.
COP’s total revenues and other income increased 82.7% year-over-year to $19.29 billion in its fiscal first quarter of 2022. Its adjusted earnings after tax and adjusted earnings per share of common stock improved 375.5% and 373.9%, respectively, from the same period in the prior year to $4.29 billion and $3.27.
The $3.65 Street EPS estimate for the quarter ending June 30, 2022, indicates a 187.4% year-over-year increase. And the Street’s $18.30 billion revenue estimate for the same quarter reflects a 79.3% improvement from the prior-year quarter. Furthermore, COP has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 98.6% in price over the past year and 60.4% year-to-date to close yesterday’s trading session at $115.75. It is currently trading above its 50-day and 200-day moving averages of $102.25 and $82.59.
It is no surprise that COP has an overall B rating, which translates to Buy in our POWR Rating system.
COP has an A grade for Momentum and a B grade for Sentiment and Quality. It is ranked #26 in the Energy – Oil & Gas industry.
To see the additional POWR Ratings for Growth, Value, and Stability for COP, click here.
Occidental Petroleum Corporation (OXY)
Houston, Tex.-based OXY is an oil and gas exploration company that operates primarily in the United States, the Middle East, Africa, and Latin America. The company operates through three segments: Oil and Gas; Chemical; and Marketing and Midstream.
On May 6, OXY declared a regular quarterly dividend of $0.13 per share on its common stock, payable to shareholders on July 15. This reflects the company’s ability to pay back its shareholders.
On May 3, EnLink Midstream Operating, LP, a subsidiary of EnLink Midstream, LLC (ENLC) and OXY subsidiary Oxy Low Carbon Ventures, LLC (OLCV), announced that they had made to a Transportation Services Agreement (TSA), under which EnLink is expected to provide OCLV with CO2 transportation services along the Mississippi River corridor. Richard Jackson, President, U.S. Onshore Resources and Carbon Management, Operations, Oxy, said, “This collaboration aligns with our strategy to accelerate the path to net zero not only for ourselves but for other organizations along the Mississippi River corridor looking to do the same.”
For its fiscal first quarter of 2022, OXY’s total revenues and other income increased 55.7% year-over-year to $8.53 billion. Its adjusted income attributable to common stockholders and adjusted EPS came in at $2.13 billion and $2.12, respectively, up substantially from their negative year-ago values.
The $2.84 consensus EPS estimate for the quarter ending June 30, 2022, indicates a 787.5% increase from the prior-year quarter. The $9.88 billion consensus revenue estimate for the same quarter reflects a 64.4% year-over-year improvement. In addition, OXY has beaten consensus EPS estimates in each of the trailing four quarters.
The stock has gained 147.4% in price over the past year and 142.9% year-to-date to close yesterday’s trading session at $70.42. It is currently trading above its 50-day and 200-day moving averages of $60.67 and $40.76.
This promising outlook is reflected in OXY’s POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system.
OXY has a Momentum grade of A and a Growth and Quality grade of B. It is ranked #21 in the Energy – Oil & Gas industry.
Click here to see the additional POWR Ratings for Value, Stability, and Sentiment for OXY.
Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada, CVE develops, produces, and markets crude oil, NGLs, and natural gas in Canada, the United States, and the Asia-Pacific region. The company operates through the Oil Sands; Conventional; Offshore; Canadian Manufacturing; U.S. Manufacturing; and Retail segments.
Regarding the planned restart of the West White Rose Project, of which SU is a part, Alex Pourbaix, CVE’s President & Chief Executive Officer, stated, “With the project about 65% complete, combined with the work done over the past 16 months to firm up cost estimates and rework the project plan, we are confident in our decision to restart this project in 2023.” The project should benefit CVE.
On April 27, CVE announced the tripling of its base dividend beginning with the second quarter and declared other plans to bolster shareholder returns. This reflects the company’s ability to generate cash.
CVE’s revenues increased 74.3% year-over-year to CAD16.20 billion ($12.80 billion) in its fiscal first quarter, ended March 31. Its net earnings and net earnings per common share stood at CAD1.63 billion ($1.28 billion) and CAD0.79, respectively, up 638.6% and 690% from the prior-year period.
The Street’s $0.90 EPS estimate for the quarter ending Sept. 30, 2022,indicates a 328.6% year-over-year rise. And the Street’s $10.74 billion revenue estimate for the same period reflects a 7.1% increase from the prior-year period.
Over the past year, the stock has gained 168.9% in price and 94.2% year-to-date to close yesterday’s trading session at $23.85. The stock is trading higher than its 50-day and 200-day moving averages of $18.74 and $13.95.
CVE has an overall B rating, which translates to Buy in our POWR Rating system.
CVE has an A grade for Momentum and Sentiment and a B grade for Growth and Value. In the Energy – Oil & Gas industry, it is ranked #12.
To see the additional POWR Ratings for Stability and Quality for CVE, click here.
Energy Transfer LP (ET)
ET in Dallas, Tex., provides energy-related services with the help of a diversified asset portfolio. The company is engaged primarily in transporting and selling natural gas and NGLs for industrial-end users and other users.
On May 3, ET announced the execution of an 18-year Sales and Purchase Agreement (SPA) with SK Gas Trading LLC to supply 0.4 million tons per annum of LNG from its Lake Charles LNG export facility. Also that day, the company's subsidiary Energy Transfer LNG Export, LLC, announced a 20-year LNG SPA with Gunvor Singapore Pte Ltd, related to its Lake Charles LNG project. These agreements should benefit the company.
For its fiscal first quarter, ended March 31, 2022, ET’s revenues increased 20.6% year-over-year to $20.49 billion. Its net income and net income per common unit came in at $1.49 billion and $0.37, respectively. Its operating income stood at $1.85 billion.
Analysts expect ET’s EPS to improve 75% year-over-year to $0.35 for its fiscal quarter ending June 30, 2022.
ET’s shares have gained 16.4% over the past year and 45.1% year-to-date to close yesterday’s trading session at $11.94. The stock is currently trading higher than its 50-day moving average of $11.26 and its 200-day moving average of $9.86.
ET has an overall B rating, which equates to Buy in our proprietary rating system.
ET has a Momentum grade of A and a Value and Sentiment grade of B. It is ranked #32 in the Energy – Oil & Gas industry.
In addition to the POWR Rating grades we have stated above, one can see ET ratings for Growth, Stability, and Quality here.
SU shares were trading at $40.31 per share on Thursday morning, down $0.63 (-1.54%). Year-to-date, SU has gained 62.77%, versus a -13.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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