Oil prices have soared in 2022, coming close to an all-time high of $147 in March following Russia’s invasion of Ukraine. Although prices cooled off over the past few weeks, Saudi Arabia is floating the idea of OPEC+ output cuts and the prospect of a drop in U.S. crude inventories, which might propel the prices.
On the other hand, according to the International Energy Agency (IEA), oil is receiving a boost from usage in power generation and gas-to-oil switching. In its August Oil Market Report, IEA raised its 2022 global demand growth estimates by 380 kb/d to 2.1 million b/d.
Truist Securities Managing Director of Energy Research Neal Dingmann believes oil prices could spike again in 2023 as oil and gas companies show limited incremental capacity. According to Dingmann, prices could jump to $110 a barrel early next year.
Given this backdrop, fundamentally strong oil stocks Marathon Oil Corporation (MRO) and Murphy Oil Corporation (MUR) might be solid buys now.
Marathon Oil Corporation (MRO)
MRO is an independent exploration and production company operating internationally. The company explores, produces, and sells crude oil, condensate, natural gas liquids, and natural gas. It also produces liquefied natural gas and methanol.
On July 27, MRO’s board of directors declared a dividend of eight cents per share on its common stock. The dividend is payable to stockholders on September 12. This reflects upon the company’s ability in shareholder returns.
MRO’s total revenues and other income came in at $2.30 billion for the second quarter ended June 30, representing a 101.4% year-over-year growth. Its income from operations grew 1,132.4% from the prior-year quarter to $1.29 billion, while its adjusted net income rose 439.9% from the same period last year to $934 million. The adjusted net income per share increased 500% from the prior-year period to $1.32.
Analysts expect MRO’s revenue for the third quarter ending September 2022 to be $2.19 billion, indicating a 50.8% year-over-year growth. The company’s EPS for the same quarter is expected to increase 231.5% from the prior-year quarter to $1.29. Additionally, MRO has an impressive record of topping its consensus EPS estimates in each of the trailing four quarters.
MRO has gained 129.9% over the past year and 50.1% year-to-date to close its last trading session at $24.65.
MRO’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
MRO has an A grade for Momentum and Quality and a B grade in Growth. It is ranked #31 out of the 97 stocks in the B-rated Energy - Oil & Gas industry.
Beyond what we’ve stated above, we have also given MRO grades for Value, Stability, and Sentiment. Get all MRO ratings here.
Murphy Oil Corporation (MUR)
MUR operates as an oil and natural gas exploration and production company in the United States, Canada, and internationally. It explores for and produces crude oil, natural gas, and natural gas liquids.
On August 3, MUR declared a quarterly dividend of $0.25 per share, payable to shareholders on September 1. This amount represents a 43% increase from the previous quarter and a 100% increase from the fourth quarter of 2021. This reflects upon the cash generation ability of the company.
MUR’s total revenues and other income increased 100.3% year-over-year to $1.10 billion in the second quarter ended June 30. Its operating income from continuing operations grew 5,537.9% from the year-ago value to $551.61 million, while its adjusted income from continuing operations attributable to MUR improved 234.4% year-over-year to $304.60 million.
The company’s adjusted earnings per common share increased 227.1% from its year-ago value to $1.93.
The consensus EPS estimate of $1.64 for the fiscal third quarter ending September indicates a 582.4% improvement year-over-year. The consensus revenue is expected to grow 49.8% from the prior-year period to $944.56 million for the same period. Additionally, MUR has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.
The stock has gained 89.4% over the past year and 40.5% year-to-date to close its last trading session at $36.68.
It is no surprise that MUR has an overall B rating, which translates to Buy in our POWR Ratings system. MUR is rated an A in Momentum and a B in Growth and Quality. It is ranked #28 in the same industry. To see additional POWR Ratings for Value, Stability, and Sentiment for MUR, click here.
MRO shares were trading at $25.68 per share on Tuesday afternoon, up $1.03 (+4.18%). Year-to-date, MRO has gained 57.90%, versus a -12.37% 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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