The oil and gas industry is experiencing significant demand propelled by economic and geopolitical uncertainties, technological advancements, and challenges of supply disruptions.
Given the industry tailwinds, it could be wise to invest in sound, high-yield energy stocks TotalEnergies SE (TTE), Shell plc (SHEL), and Energy Transfer LP (ET) for potential gains.
Oil prices have been highly volatile recently driven by uncertain worldwide economies and demand-supply drift. The U.S. Energy Information Administration stated that global oil demand is likely to outpace supply in the next year.
Further, it is expected that oil prices will increase to an average of $89/b during the remaining year and will reach $91/b in the first quarter of 2025. Further, amid OPEC+ cuts limiting world oil production growth, outside of OPEC+, prospects remains robust.
Global production of petroleum and other liquid fuels is likely to increase by 0.6 million b/d in 2024, where production outside of OPEC+ will rise by 1.9 million b/d. In 2025, global production of liquid fuels is expected to rise by 2.2 million b/d. Further, anticipation of global consumption of liquid fuels is set at 1.1 million b/d in 2024 and 1.8 million b/d in 2025.
Besides, IMARC Group expects the global oil and gas market to hit $65.80 billion by 2032, expanding at a notable CAGR of 15.8%. During the forecast period, trends like rising geopolitical tensions, technological advancements, and shifting environmental policies will drive the market demand and growth.
Amid the high prospects of the oil and gas industry, high-yield stocks represent stability with reliable passive income and the possibility of long-term growth, making them a smart investment choice in this unpredictable environment.
Also, investors’ interest in energy stocks is evident from the Invesco Dynamic Oil & Gas Services ETF’s (PXJ) 16.6% returns over the past six months.
Given the industry’s robust outlook, lets delve into the fundamentals of the top high-yield energy stocks, beginning with number 3.
Stock #3: TotalEnergies SE (TTE)
Headquartered in Courbevoie, France, TTE is a multi-energy company which produces and markets oil and biofuels, natural gas, green gases, renewables, and electricity internationally. The company operates in five segments: Exploration & Production; Integrated LNG; Integrated Power; Refining & Chemicals; and Marketing & Services.
On July 30, TTE signed an agreement with Scatec, a Norwegian renewable energy company, to acquire 100% of its subsidiary SN Power, which is holding interests in renewable hydropower projects in Africa, through a joint venture (51% SN Power) with Norfund and British International Investment.
The strategic acquisition of renewable hydroelectric assets and projects in Africa will allow TTE to contribute to the continent’s energy transition. Also, it showcases the company’s ability to implement its multi-energy strategy in oil-producing countries to support energy transition.
On July 25, TTE’s Board of Directors declared the distribution of the second 2024 interim dividend of €0.79 per share, indicating an increase of 6.8% compared to the three interim dividends paid during fiscal year 2023.
TTE pays an annual dividend of $3.23, which translates to a yield of 4.80% at the prevailing share price. Its four-year average dividend yield is 6.31%. Further, the company’s dividend payouts have increased at a CAGR of 2.1% over the past five years.
During the second quarter that ended June 30, 2024, TTE reported revenue from sales of $49.18 billion. Its adjusted net operating income from Exploration & Production segment grew 13.5% from the year-ago value to $2.67 billion. The company’s consolidated net income and EPS came in at $3.85 billion and $1.61 for the quarter, respectively.
In addition, the company’s adjusted EBITDA and net cash flow stood at $11.07 billion and $3.15 billion for the quarter.
Street expects TTE’s EPS for the fiscal year (ending December 2025) to grow 6.1% year-over-year to $9.36 and its revenue is expected to be $206.68 billion. Furthermore, the company surpassed the consensus revenue estimates in all of the trailing four quarters, which is impressive.
Over the past six months, TTE’s stock has gained 2.7% and 10.6% over the past year to close the last trading session at $67.32.
TTE’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.
TTE has a B grade for Quality, Momentum, and Stability. It is ranked #9 out of 80 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have other TTE ratings for Sentiment, Growth, and Value. Get all TTE ratings here.
Stock #2: Shell plc (SHEL)
Headquartered in London, United Kingdom, SHEL is an energy and petrochemical company operating in Europe, Asia, Oceania, Africa, the United States, and Rest of the Americas. It operates in Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments.
On July 9, SHEL’s subsidiary Shell Trinidad and Tobago Ltd., announced Final Investment Decision (FID) on the Manatee project which is an undeveloped gas field in the East Coast Marine Area in Trinidad and Tobago. Manatee will enable SHEL to competitively grow its Integrated Gas business via building on development efforts in the ECMA.
With this project, SHEL will be able to meet the rising demand for natural gas globally and the energy needs domestically in Trinidad and Tobago.
On May 2, SHEL’s Board announced an interim dividend in respect of the first quarter of 2024 of $ 0.34 per ordinary share. SHEL pays an annual dividend of $2.70, which translates to a yield of 3.75% at the current share price. Its four-year average dividend yield is 3.04%.
During the first quarter that ended March 31, 2024, SHEL’s adjusted earnings rose 5.9% from the prior quarter to $7.73 billion and its adjusted EBITDA increased 14.5% to $18.71 billion over the same period. Also, the company’s CFFO came in at $13.33 billion, indicating growth of 6% from the quarter-ago value.
In addition, the company’s free cash flow grew 42% to $9.80 billion from the previous quarter.
Street expects SHEL’s revenue and EPS for the second quarter (ended June 2024) to increase 21.1% and 18.8% year-over-year to $90.27 billion and $1.78, respectively. The company’s EPS for the fiscal year 2025 is expected to increase 3.2% year-over-year to $8.37.
Over the past six months, SHEL’s stock has gained 13.3% and 16.6% over the past year to close the last trading session at $71.84.
SHEL’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 Sentiment, Stability, Momentum, and Quality. Within the Energy – Oil & Gas industry, SHEL is ranked #6 of 80 stocks.
Click here to access additional ratings of SHEL for Growth and Value.
Stock #1: Energy Transfer LP (ET)
ET provides energy-related services. The company owns and operates natural gas transportation pipelines and natural gas storage facilities in Texas and Oklahoma, as well as approximately 20,090 miles of interstate natural gas pipeline.
On July 25, ET announced an increase in its quarterly cash distribution to $0.32 per common unit for the second quarter ended June 30, 2024. The cash distribution per ET common unit will be paid on August 19, 2024 to unitholders of record as of the close of business on August 9, 2024, and is an increase of 3.2% compared to the second quarter 2023.
ET pays an annual distribution of $1.28, which translates to a yield of 7.87% at the current share price. Its four-year average dividend yield is 9.20%. Moreover, the company’s dividend payouts have increased at a CAGR of 18.1% over the past three years.
On July 16, ET and Sunoco LP (SUN) entered into a joint venture combining their crude oil and produced water gathering assets in the Permian Basin. ET will be holding 67.5% interest in the joint venture with Sunoco holding a 32.5% interest.
Also, on the same day, ET completed its previously announced acquisition of WTG Midstream Holdings LLC. Total consideration for the transaction was $2,275 million in cash and nearly 50.8 million newly issued ET common units. The acquisition expanded Permian Basin pipeline and processing network providing further access to growing supplies of natural gas and NGLs.
For the first quarter that ended March 31, 2024, ET’s revenues increased 13.9% year-over-year to $21.63 billion. Its operating income grew 15.4% from the year-ago value to $2.38 billion. Its net income came in at $1.69 billion, up 16.9% from the prior year’s quarter. In addition, the company’s adjusted EBITDA increased 13% year-over-year to $3.88 billion.
Street expects ET’s revenue for the second quarter (ended June 2024) to increase 17.4% year-over-year to $21.50 billion. The company’s EPS for the same quarter is expected to grow 41% year-over-year to $0.35. For the fiscal year 2024, the company’s revenue and EPS are expected to increase 12% and 33.8% year-over-year to $88.01 billion and $1.46, respectively.
ET’s stock has surged 10.3% over the past six months and 20.5% over the past year to close the last trading session at $16.02.
ET’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B which translates to a Buy in our proprietary rating system.
ET has an A grade for Momentum. The stock also has a B grade for Growth, Value, and Stability. ET is ranked #4 among 80 stocks in the same industry.
Click here to access ET’s ratings for Quality, and Sentiment.
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SHEL shares were trading at $71.70 per share on Tuesday afternoon, down $0.14 (-0.19%). Year-to-date, SHEL has gained 11.21%, versus a 14.45% 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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