The energy sector is thriving, propelled by surging energy consumption amid economic growth and industrialization and numerous innovations in energy production and distribution technology. Therefore, investors could consider buying top energy stocks TotalEnergies SE (TTE), Cheniere Energy, Inc. (LNG), and ChampionX Corporation (CHX) for portfolio gains.
The Organization of the Petroleum Exporting Countries (OPEC) expects strong oil demand growth. The world oil demand is expected to rise by 2.25 million bpd in 2024 and 1.85 million bpd in 2025, respectively. Economic growth forecasts are raised by 0.1% points for both years, with expected growth of 2.7% in 2024 and 2.9% in 2025, supported by easing general inflation.
Meanwhile, natural gas demand will surge due to economic growth, industrialization, and infrastructure development. The global LNG market is projected to grow at a CAGR of 7.6% to reach $213.78 billion by 2032. Moreover, in the U.S., the shift to natural gas, particularly in power generation, fuels the demand for LNG, supported by robust infrastructure and industrial activities.
According to the estimates by the U.S. Energy Information Administration (EIA), 118 Bcf/d of natural gas was consumed in the U.S. in January, setting a new monthly record driven by the electric power sector. EIA further forecasts that U.S. natural gas consumption will increase by 5% year-over-year in the first quarter of 2023.
Furthermore, the oil and gas industry is experiencing significant growth boosted by increasing digitalization, rising exploration activities, and growing energy consumption, with advanced technologies offering efficiency and safety benefits. The global oil & gas automation market is estimated to grow at a significant CAGR of 6.7% to reach $33.34 billion by 2030.
Continued advancements in exploration and production technologies, including hydraulic fracturing and horizontal drilling, have enabled the extraction of unconventional oil and gas reserves, leading to enhanced production and industry growth.
Considering these conducive trends, let’s discuss the fundamentals of three energy stock picks: TTE, LNG, and CHX.
TotalEnergies SE (TTE)
Based in Courbevoie, France, TTE is a global multi-energy company that engages in producing and marketing fuels, natural gas, and electricity. It operates through five segments: Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services.
On February 29, 2024, TTE signed a 16-year sale and purchase (SPA) agreement with Sembcorp Fuels, a wholly owned subsidiary of Singapore-based Sembcorp Industries, to supply up to 0.8 million tons per annum (Mtpa) of LNG starting in 2027. The LNG will be sourced from TotalEnergies’ global portfolio. This new deal adds to the companies’ current SPA, which is until 2029.
This agreement underscores TTE’s commitment to supporting Singapore's energy security and decarbonization efforts while enhancing its position as a major global LNG player.
On February 6, TTE proposed a dividend for fiscal year 2023 of €3.01 ($2.22) per share, up 7.1% from the ordinary dividend for fiscal year 2022 of €2.81 ($2.07) per share. Taking into consideration the three interim dividends of €0.74 ($0.55) /share previously decided by the Board of Directors, the final dividend for fiscal year 2023 will be €0.79 ($0.58) /share.
TTE’s final dividend will be paid in cash on July 1, 2024, to shareholders and on July 11, 2024. The company's annual dividend translates to a yield of 4.97% on the prevailing price level.
TTE reported revenues from sales of $54.77 billion in the fourth quarter that ended December 31, 2023. The company reported an adjusted net operating income and adjusted EBITDA of $5.55 billion and $11.70 billion, respectively. Also, cash inflow from operating activities was $16.15 billion, an increase of 70% from the previous quarter.
Street expects TTE’s revenue and EPS to be $217.33 billion and $9.01, respectively, for the fiscal year ending December 2024. For the fiscal year 2025, its EPS is expected to grow 3.1% year-over-year to $9.29. Moreover, the company has surpassed consensus revenue estimates in three of the trailing four quarters.
TTE’s shares have gained 12% over the past nine months to close the last trading session at $64.50. Also, the stock surged marginally intraday.
TTE’s POWR Ratings reflect this strong outlook. The stock has an overall B rating, translating 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.
TTE has a B grade for Momentum, Stability, and Quality. Within the Energy - Oil & Gas industry, it is ranked #3 among 83 stocks.
In addition to the POWR Ratings stated above, one can access TTE’s additional Growth, Value, and Sentiment ratings here.
Cheniere Energy, Inc. (LNG)
LNG is an energy infrastructure company specializing in liquefied natural gas (LNG) related operations. The company owns and operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana, and the Corpus Christi LNG terminal near Corpus Christi, Texas. Also, it owns the Creole Trail pipeline and operates the Corpus Christi pipeline.
On February 23, 2024, LNG paid a quarterly cash dividend of $0.435 per common share. The company pays $1.74 annually, which translates to a yield of 1.11% on the prevailing price level, higher than its four-year average dividend yield of 0.46%.
On November 29, 2023, LNG and Cheniere Energy Partners, LP (CQP) announced today that Sabine Pass Liquefaction Stage V, LLC entered a long-term Integrated Production Marketing (IPM) gas supply agreement with ARC Resources U.S. Corp., a subsidiary of ARC Resources Ltd. (ARX), a prominent natural gas producer based in Canada.
Under the IPM deal, ARC Resources will sell 140,000 MMBtu per day of natural gas to SPL Stage 5 for a term of 15 years, starting with commercial operations of the first train of the Sabine Pass Liquefaction Expansion Project. This agreement might enable Cheniere to deliver higher quantities of Canadian natural gas to Europe.
During the fourth quarter, which ended December 31, 2023, LNG’s total revenues amounted to $4.82 billion. The company posted income from operations and net income of $2.44 billion and $1.83 billion, respectively. As of December 31, 2023, its total assets amounted to $43.08 billion, compared to its total assets of $41.27 billion as of December 31, 2022.
The company forecasts a consolidated adjusted EBITDA for the fiscal year 2024, ranging between $5.50 billion and $6 billion, while its distributable cash flow is expected to fall between $2.90 billion and $3.40 billion.
For the fiscal year ending December 2025, analysts expect LNG’s revenue and EPS to increase 22% and 14.3% year-over-year to $20.69 billion and $10.34, respectively. Also, the company surpassed consensus EPS estimates in each of the trailing four quarters.
The stock has gained 9.8% over the past nine months to close the last trading session at $156.18.
LNG’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
The stock has a B grade for Momentum, Sentiment, and Quality. In the Energy - Oil & Gas industry, LNG is ranked #11 of 83 stocks.
To access additional ratings for LNG’s Growth, Value, and Stability, click here.
ChampionX Corporation (CHX)
CHX provides chemistry solutions, artificial lift systems, and engineered equipment & technologies to oil and gas companies globally. The company operates through Production Chemical Technologies, Production & Automation Technologies, Drilling Technologies, and Reservoir Chemical Technologies segments.
On February 27, 2024, CHX acquired Artificial Lift Performance Limited (ALP), bolstering its digital solutions portfolio for oil and gas production optimization. This strategic move combines ALP’s advanced analytics expertise with CHX’s XSPOC™ software to enhance productivity and profitability for customers’ producing assets.
On February 5, CHX’s Board approved a 12% increase in the regular quarterly dividend to $0.095 per common share, payable on April 26, 2024. The company pays $0.38 annually, which translates to a yield of 1.19% on the prevailing price level. Its four-year average dividend yield is 0.42%.
In the fourth quarter, which ended December 31, 2023, CHX reported revenue of $943.56 million. The company’s adjusted EBITDA came in at $198.15 million, an increase of $10.4% from the prior year’s quarter. Moreover, its adjusted EPS attributable to CHX rose 2.3% year-over-year to $0.44.
Furthermore, the company’s cash flow from operating activities was $169 million during the fourth quarter, and it generated free cash flow of $140 million, converting 71% of its adjusted EBITDA for the period.
Street expects CHX’s revenue and EPS to grow 3.6% and 11% year-over-year to $3.89 billion and $1.99, respectively, for the fiscal year ending December 2024. In addition, the company topped consensus EPS estimates in three of the trailing four quarters, which is promising.
CHX’s stock has surged 17% over the past month and 21.6% over the past nine months to close the last trading session at $31.89. Also, it gained 2.7% intraday.
CHX’s POWR Ratings reflect its optimistic prospects. The stock has an overall B rating, translating to a Buy in our proprietary rating system.
The stock has a B grade for Quality. Within the Energy - Services industry, CHX is ranked #10 out of 51 stocks.
Click here to see CHX’s ratings for Growth, Value, Momentum, Stability, and Sentiment.
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TTE shares were unchanged in premarket trading Monday. Year-to-date, TTE has declined -4.27%, versus a 7.90% 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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