Amid rising economic and geopolitical uncertainties followed by oil production cuts by OPEC+ members and Mexico, oil demand is surging rapidly with limited supply, leading to hiked prices. Brent crude futures surged above $89 per barrel lately and are set to gain nearly 2% this week.
Given the industry tailwinds, it could be wise to invest in fundamentally sound energy stocks Cenovus Energy Inc. (CVE), Weatherford International plc (WFRD), and Gulf Island Fabrication, Inc. (GIFI) for significant growth in May.
According to the World Bank, the outbreak of a major conflict in the Middle East could trigger an energy shock, pushing oil prices over $100 a barrel. Earlier this month, tensions in the Middle East escalated as Israel and OPEC member Iran appeared on the brink of war, increasing fears of crude oil supply disruptions.
In an attempt to supply more to its domestic refineries for energy self-sufficiency, Mexico's state energy company, Pemex, plans to cut at least 330,000 barrels per day (bpd) of crude exports in the next month. This will leave customers in economies like the U.S., Europe, and Asia, further constraining supply.
Tighter oil supplies due to OPEC+ cuts, resilient economic growth, and continued geopolitical uncertainty propel steady oil price hikes. Moreover, EIA forecasted that Brent crude oil spot price will average $90 per barrel in the second quarter of 2024, which is $2/b more than its March STEO, and it expects the prices to average $89/b in 2024.
The global oil and gas market is expected to reach $65.80 billion by 2032, exhibiting a CAGR of 15.8% during the forecast period (2024-2032). Meanwhile, the global offshore drilling market is projected to grow at a CAGR of 8.2% to total $197.93 billion by 2031.
Moreover, investors’ interest in energy stocks is evident from the Vanguard Energy ETF’s (VDE) 20.7% returns over the past year.
Given the industry’s robust outlook, investing in quality energy stocks such as CVE, WFRD, and GIFI could be wise for future gains.
Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products in Canada and internationally. It operates through segments like Oil Sands; Conventional; Offshore, Canadian Refining; and U.S. Refining.
CVE’s revenue and EBITDA have grown at respective CAGRs of 56.8% and 172.8% over the past three years. The company’s tangible book value has increased at a CAGR of 20.7% over the same timeframe, while its total assets have improved at a CAGR of 18.1%.
On February 15, 2024, CVE’s Board of Directors declared a quarterly base dividend of $0.14 per common share, paid on March 28, 2024, to shareholders of record as of March 15, 2024.
Also, the Board declared a quarterly dividend on each of the cumulative redeemable first preferred shares – Series 1 ($0.16), Series 2 ($0.42), Series 3 ($0.29), Series 5 ($0.29) and Series 7 ($0.24) – paid on April 1, 2024, to shareholders of record as of March 15, 2024.
CVE pays an annual dividend of $0.42 per share, which translates to a yield of 1.96% on the current share price. Its four-year average dividend yield is 1.50%. The company’s dividend payouts have grown at a CAGR of 210% over the past three years.
On December 13, 2023, CVE announced its 2024 budget, expecting to invest capital of between $4.5 billion and $5.0 billion in 2024. Total upstream production is expected to be between 770,000 and 810,000 barrels of oil equivalent per day (BOE/d), and oil sands and thermal projects production is expected to be between 590,000 and 610,000 barrels per day (bbls/d).
CVE reported revenues of C$13.13 billion ($9.60 billion) during the fourth quarter that ended December 31, 2023, and its earnings before income tax were C$974 million ($711.81 million) for the quarter. The company’s net earnings came in at C$743 million ($542.99 million) and C$0.39 per share, respectively.
Furthermore, as of December 31, 2023, the company’s cash and cash equivalents and total assets stood at C$2.23 billion ($1.63 billion) and C$53.91 billion ($39.40 billion), respectively.
Analysts expect CVE’s revenue for the first quarter (ended March 2024) to increase 14.2% year-over-year to $10.76 billion, and its EPS for the same quarter is expected to grow 40.9% year-over-year to $0.37. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 5.8% and 23.4% year-over-year to $41.03 billion and $1.97, respectively.
Shares of CVE have surged 8.5% over the past month and 25.1% over the past year to close the last trading session at $21.28.
CVE’s POWR Ratings reflect its robust outlook. 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, with each factor weighted to an optimal degree.
CVE has an A grade for Sentiment and a B grade for Growth. It is ranked #13 out of 82 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings of CVE for Quality, Momentum, Stability, and Value. Get all CVE ratings here.
Weatherford International plc (WFRD)
WFRD is an energy services company that offers equipment and services for the drilling, evaluation, completion, production, and intervention of oil, geothermal, and natural gas wells globally. It operates in three segments: Drilling and Evaluation; Well Construction and Completions; and Production and Intervention.
Revenue and EBITDA of WFRD have grown at respective CAGRs of 17.1% and 76.7% over the past three years. The company’s tangible book value has increased at a CAGR of 249.5% over the same timeframe.
On December 6, 2023, WFRD was awarded a five-year contract by Petróleo Brasileiro S.A. in Brazil to provide Drill Pipe Riser (DPR) ultra-deepwater offshore intervention systems and services whose operations will commence in March 2025.
The deal reflects the efficiency of WFRD’s Intervention Workover Control Systems (IWOCS) and highlights the strength of its Brazilian operations.
On November 3, 2023, WFRD signed a MOU with Honeywell to deliver a combined CygNet™ SCADA and Honeywell Emissions Management suite for advanced emissions management and accelerating its customers’ decarbonization strategy. This provides cutting-edge tools, actionable data, and real-time progress monitoring to enable their net-zero journey.
During the first quarter that ended March 31, 2024, WFRD’s total revenues rose 14.5% year-over-year to $1.36 billion. Its operating income increased 25.9% year-over-year to $233 million. Also, net income attributable to Weatherford came in at $123 million or $1.50 per share, indicating growth of 51.8% and 54.6% from the year-ago value, respectively.
In addition, its adjusted EBITDA rose 24.9% from the previous year’s quarter to $336 million. The company’s adjusted free cash flow grew 203.7% from the year-ago value to $82 million.
Street expects WFRD’s revenue and EPS for the second quarter (ending June 2024) to increase 12% and 50.6% year-over-year to $1.43 billion and $1.72, respectively. Furthermore, the company surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
Over the past six months, WFRD’s stock has gained 33% and 108.1% over the past year to close the last trading session at $123.65.
WFRD’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
The stock has a B grade for Growth, Momentum, and Quality. Within the Energy – Oil & Gas industry, WFRD is ranked #12 of 82 stocks.
Click here to access additional ratings of WFRD for Sentiment, Stability, and Value.
Gulf Island Fabrication, Inc. (GIFI)
GIFI operates as a fabricator of steel structures and modules. The company operates through Services; Fabrication; and Shipyard divisions. It offers maintenance, repair, construction, scaffolding, coatings, welding enclosures, and other specialty services on offshore platforms, inland structures, and industrial facilities.
On February 27, GIFI completed the sale of certain excess property, which was part of the company’s facilities located in Houma, Louisiana, for net cash proceeds of approximately $8.5 million.
“A key aspect of our strategic transformation has been to improve our resource and facility utilization and the sale of this property at our Houma facility is consistent with this objective,” commented Richard Heo, Gulf Island’s President and Chief Executive Officer.
For the fourth quarter that ended December 31, 2023, GIFI’s revenue increased 16.8% year-over-year to $44.55 million, and its gross profit rose 77.2% from the year-ago value to $8.37 million. The company’s operating income of $6.67 million indicates growth of 1656.6% from the prior year’s quarter.
In addition, the company’s net income came in at $7.09 million or $0.43 per share, up 1191.4% and 975% year-over-year, respectively. Its adjusted EBITDA increased 188.1% from the year-ago value to $6.61 million.
Analysts expect GIFI’s EPS for the first quarter (ended March 2024) to increase 100% year-over-year to $0.08. Its revenue for the same period is expected to be $43 million. Moreover, the company topped the consensus revenue estimates in each of the trailing four quarters.
GIFI’s stock has surged 67.3% over the past six months and 96.5% over the past year to close the last trading session at $6.76.
GIFI’s POWR Ratings reflect its bright prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
GIFI has an A grade for Sentiment and Growth. The stock also has a B grade for Momentum. The stock is ranked #2 among 15 stocks in the Energy - Drilling industry.
To access GIFI’s other ratings, click here.
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CVE shares rose $0.07 (+0.33%) in premarket trading Friday. Year-to-date, CVE has gained 28.95%, versus a 7.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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