While OPEC+ endeavors to raise oil prices were stifled by the surge in U.S. production, recent forecasts indicate a slowdown in U.S. production this year, paving the way for a surge in oil prices. On the other hand, escalating geopolitical tensions in the Middle East, along with robust demand forecasts for this year, are further contributing to this upward momentum.
Given the promising backdrop, this article explores the fundamentals of three solid energy stocks, Marathon Petroleum Corporation (MPC), Weatherford International plc (WFRD), and Geospace Technologies Corporation (GEOS), which appear well poised to capitalize on the industry prospects.
The IEA anticipates that global oil consumption will surge by 1.24 million barrels per day (bpd) in 2024, up 180,000 bpd from its previous projection, marking the third consecutive upward adjustment in its forecast. This upward trend is fueled by the improving global economic growth and the expanding petrochemicals sector in China.
Meanwhile, despite OPEC+ efforts to bolster oil prices through supply cuts, oil prices remained subdued, buoyed by record volumes of oil production in 2023 by the United States. However, Occidental Petroleum Corporation (OXY) CEO Vicki Hollub cautioned that undersupply is poised to become the prevailing theme in the forthcoming years.
On top of it, the U.S. Energy Information Administration (EIA) has revised its forecast for domestic oil growth in 2024, reducing it by 120,000 bpd to 170,000 bpd. This figure represents a significant decrease compared to last year's output increase of 1.02 million bpd.
Furthermore, Oil prices surged by over 3% yesterday due to concerns about an escalating conflict in the Middle East triggered by Israel's rejection of a ceasefire proposal from Hamas. Brent futures rallied 3% to reach $81.36 per barrel and West Texas Intermediate (WTI) crude surged by 3.2%, settling at $76.22 per barrel. This significant uptick saw Brent breaching $80 per barrel and WTI reaching above $75 per barrel for the first time this month.
With the energy sector’s prospects heating, evident from the soaring oil prices, investors may find it advantageous to acquire the shares of MPC, WFRD, and GEOS. To that end, let’s now delve deeper into the fundamentals of these stocks in detail:
Marathon Petroleum Corporation (MPC)
MPC operates as an integrated downstream energy company primarily in the United States. It operates in two segments, Refining & Marketing, and Midstream.
On January 26, 2024, MPC declared a quarterly dividend of $0.83 per share, payable to its shareholders on March 11, 2024. The company’s annual dividend of $3.30 translates to a 1.95% yield on the prevailing price level, while its four-year average dividend yield is 3.78%. Its dividend payouts have grown at CAGRs of 9.9% and 10.8% over the past three and five years, respectively.
On November 14, 2023, MPC and Archer-Daniels-Midland Company (ADM) celebrated the opening of their joint venture soybean processing complex, Green Bison Soy Processing, in Spiritwood, North Dakota. This is the state's first soybean processing complex dedicated to meeting the rising demand for renewable fuels like green diesel.
Annually, the facility is expected to produce roughly 600 million pounds of refined soybean oil, capable of generating approximately 75 million gallons of renewable green diesel. Representing an investment of around $350 million, this state-of-the-art complex is equipped with advanced automation technology and has the capacity to process 150,000 bushels of soybeans daily.
For the fiscal fourth quarter, which ended on December 31, 2023, MPC’s total revenues and other income amounted to $36.26 billion. The company’s attributable adjusted net income came in at $1.51 billion and $3.98 per share, respectively. In addition, its adjusted EBITDA stood at $3.53 billion.
Analysts predict MPC’s revenue and EPS for the fiscal 2024 first quarter (ending March 2024) to come in at $33.43 billion and $1.95, respectively. Moreover, the company has surpassed its revenue estimates in three of the trailing four quarters and EPS estimates in each of the trailing four quarters, which is promising.
MPC’s shares have surged 58.7% over the past nine months to close the last trading session at $169.68.
MPC’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B grade for Momentum. In the 82-stock Energy - Oil & Gas industry, it is ranked #7. Click here to see MPC’s ratings for Growth, Value, Stability, and Sentiment.
Weatherford International plc (WFRD)
WFRD provides equipment and services for the drilling, evaluation, completion, production, and intervention of oil, geothermal, and natural gas wells worldwide. The company operates through three segments: Drilling and Evaluation; Well Construction and Completions; and Production and Intervention.
On November 7, 2023, WFRD entered into a memorandum of understanding (MOU) with Honeywell to combine its CygNet™ SCADA platform and Honeywell’s Emissions Management suite. CygNet™ SCADA is widely recognized for its real-time data processing capabilities in the energy sector, facilitating operational decisions.
Meanwhile, Honeywell's Emissions Management suite provides outcome-driven solutions for emissions measurement, monitoring, and reduction.
This partnership aims to provide customers with advanced emissions management tools to expedite their decarbonization strategies. By integrating these systems, users will gain immediate access to vital data, enabling swift risk mitigation and enhancing operational efficiency in achieving decarbonization goals.
In the same month, WFRD’s issuer credit rating was upgraded by S&P Global Ratings (S&P) from B to B+. This enhancement can be attributed to the company's ongoing debt repayments, improved profitability, and favorable demand conditions that have bolstered its cash flows.
Girish Saligram, President and Chief Executive Officer of WFRD, expressed satisfaction with the S&P rating upgrade, emphasizing that the agency's decision is a testament to the tangible enhancements evident in the company's operational performance and balance sheet.
During the fiscal fourth quarter, which ended on December 31, 2023, WFRD’s total revenues increased 12.7% year-over-year to $1.36 billion, while its adjusted EBITDA improved 20.7% from the year-ago value to $321 million.
The company’s net income and EPS came in at $147 million and $1.90, representing increases of 93.4% and 91.9% from the prior-year quarter, respectively. Also, its adjusted free cash flow rose 84.2% year-over-year to $315 million.
The consensus revenue estimate of $1.33 billion for the fiscal 2024 first quarter (ending March 2024) represents a 12% improvement year-over-year. Meanwhile, the consensus EPS estimate of $1.42 for the ongoing quarter reflects a 46.6% year-over-year surge. Moreover, the company has topped its revenue estimates in each of the trailing four quarters, which is impressive.
The stock has climbed 61.9% over the past six months to close the last trading session at $98.45.
WFRD’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Momentum, Sentiment, and Quality. Within the same Energy - Oil & Gas industry, it is ranked #3. Click here to see the other ratings of WFRD for Value and Stability.
Geospace Technologies Corporation (GEOS)
GEOS designs and manufactures instruments and equipment used in the oil and gas industry to acquire seismic data in order to locate, characterize, and monitor hydrocarbon-producing reservoirs. The company operates through three segments: Oil and Gas Markets; Adjacent Markets; and Emerging Markets.
On February 7, 2024, GEOS disclosed its fiscal 2024 first quarter results, which marks the company’s fourth consecutive profitable quarter. Walter R. ("Rick") Wheeler, the President and CEO of GEOS, credited this accomplishment to a blend of enhanced industry demand for products in the Oil and Gas Markets segment and the company's dedication to financial prudence and operational optimization over the preceding year.
Wheeler further highlighted that the company’s reported revenue in the first quarter represents the highest quarterly figure attained in nearly ten years, while the net income reflects its unwavering commitment to delivering value to its shareholders.
GEOS’ total revenue for the fiscal 2024 first quarter (ended December 31, 2023) increased 60.8% year-over-year to $50.03 million, while its gross profit improved 111.1% from the year-ago value to $22.24 million.
Meanwhile, the company reported a net income of $12.68 million and $0.94 per share versus a net loss of $97 thousand and $0.01 per share in the prior-year quarter, respectively. As of December 31, 2023, its total current assets stood at $99.99 million, up 31.9% compared to $75.78 million as of September 30, 2023.
Furthermore, GEOS’ EPS is expected to increase by 37% per annum over the next five years. Also, the company has an excellent revenue surprise history, surpassing its revenue estimates in each of the trailing four quarters.
GEOS’ shares have soared 89.8% over the past nine months and 87.8% over the past six months to close the last trading session at $14.22.
It’s no surprise that GEOS has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Growth, Momentum, and Quality. In the 51-stock Energy - Services industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have GEOS’ ratings for Value, Stability, and Sentiment. Get all GEOS ratings 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.
MPC shares were trading at $169.26 per share on Friday morning, down $0.42 (-0.25%). Year-to-date, MPC has gained 14.09%, versus a 5.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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