While the ongoing conflict between Hamas and Israel has raised concerns about potential supply chain disruptions, both the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) maintain a confident outlook. In light of this situation, we present quality energy stocks, Sabine Royalty Trust (SBR), Obsidian Energy Ltd. (OBE), and Energy Transfer LP (ET), that are well-positioned for strong growth as oil prices surge.
As tensions intensify across the Middle East, energy markets are keenly attuned to the surging oil prices, which have experienced a noteworthy increase of nearly by the start of October, reaching approximately $78 per barrel.
OPEC forecasts a 24% increase in global energy demand between 2024 and 2050, anticipating robust medium-term growth in oil consumption, which is projected to reach 112.3 million barrels per day by 2029. Similarly, the IEA anticipates a global demand for natural gas to rise by more than 2.5% in 2024, with similar growth projected for 2025.
With these trends in focus, let's examine the fundamentals of three Energy – Oil & Gas stocks, starting with #3.
Stock #3: Sabine Royalty Trust (SBR)
SBR holds royalty and mineral interests in various oil and gas production properties in the United States. Its royalty and mineral interests include landowner’s royalties, overriding royalty interests, minerals, production payments, and other similar non-participatory interests in certain producing and proved undeveloped oil and gas properties.
On October 4, SBR announced a monthly cash distribution to the holders of its units of beneficial interest of $0.435840 per unit, payable on October 29, 2024. It pays an annual dividend of $5.23 per unit, which translates to a yield of 8.57% on the current share price. Its four-year average dividend yield is 8.95%. The company’s dividend payouts have grown at a CAGR of 32.3% over the past three years.
Over the past three years, SBR’s revenue and EBITDA have grown at CAGRs of 34.8% and 36.9%, respectively.
For the fiscal second quarter that ended June 30, 2024, SBR’s royalty income increased 29.7% year-over-year to $22.61 million, while its distributable income increased 32.2% year-over-year to $22.08 million. In addition, its distributable income per unit increased 31.3% year-over-year to $1.51.
The stock climbed 8.9% year-to-date to close the last trading session at $61.02.
SBR’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, equating 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.
It has a B grade for Growth, Sentiment, and Quality. SBR is ranked #9 out of 78 stocks in the Energy – Oil & Gas industry.
Click here to access all SBR ratings (Value, Momentum, and Stability).
Stock #2: Obsidian Energy Ltd. (OBE)
Headquartered in Calgary, Canada, OBE is engaged in the exploration, production, and development of oil and natural gas properties in Western Canada.
Over the past three years, OBE’s revenue and EBITDA have grown at CAGRs of 22.2% and 37.6%, respectively.
OBE’s total production increased 20.6% year-over-year to 39,714 boe/d during the fiscal third quarter that ended September 30, 2024. The company’s net income stood at CAD 33.20 million ($23.85 million) and CAD 0.42 per share, up 33.9% and 40% from the previous year’s quarter, respectively.
Analysts expect OBE’s revenue for the fiscal year (ending December 2024) to increase 12.6% year-over-year to $601.86 million, and its EPS is expected to grow 42% year-over-year to $1.35 in the same year.
Shares of OBE have gained marginally over the past year and 1.8% over the past month to close the last trading session at $5.67.
OBE’s promising 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 stock has a B grade for Growth, Value, and Sentiment. Within the same industry, OBE is ranked #4.
Access additional OBE ratings for Momentum, Quality, and Stability here.
Stock #3: 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.
Over the past three years, OBE’s revenue and net income have grown at CAGRs of 17.1% and 5.8%, respectively.
In the fiscal second quarter that ended June 30, 2024, ET’s revenues increased 13.1% year-over-year to $20.73 billion. Its operating income grew 25.2% from the year-ago value to $2.30 billion. Additionally, ET’s net income came in at $1.99 billion, or $0.35, per share, increasing 61.6% and 40% year-over-year.
Analysts expect ET’s EPS and revenue for the quarter ended September 30, 2024, to increase 131.2% and 4.1% year-over-year to $0.35 and $21.59 billion, respectively.
Over the past year, the stock has gained 24.6% to close the last trading session at $16.48. It soared 18.7% year-to-date.
ET’s POWR Ratings reflect its robust fundamentals. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
ET has an A grade for Growth and a B for Value, Momentum, Stability, and Sentiment. Within the same industry, it is ranked #2.
To see ET’s ratings for Quality, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
ET shares were trading at $16.50 per share on Friday morning, up $0.02 (+0.12%). Year-to-date, ET has gained 27.20%, versus a 22.03% 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.
3 Energy Stocks Poised for Strong Growth as Oil Prices Surge StockNews.com
