The oil and gas industry is poised for promising growth, fueled by ongoing conflicts in the Middle East and Ukraine, alongside the OPEC+ alliance's strategic control over production levels. This growth is further bolstered by advancements in exploration, production, and development of oil, natural gas, and energy-related services.
Amid this backdrop, it could be wise to consider buying fundamentally strong oil and gas stocks, such as Obsidian Energy Ltd. (OBE), Energy Transfer LP (ET), and PrimeEnergy Resources Corporation (PNRG), which offer both value and growth.
Despite lower demand from China, rising inventories, and OPEC+ plans to ease output cuts, oil prices could surge if the Israel-Hamas conflict escalates, leading to supply disruptions. Meanwhile, global natural gas demand surged in early 2024, particularly in Asia, with China and India experiencing double-digit growth.
Statista forecasts that by 2045, primary energy consumption will reach approximately 359 million barrels of oil equivalent per day. Oil and gas will continue to dominate, contributing 100 and 85 million barrels of oil equivalent per day, respectively. High oil prices, strong demand, and the industry's solid financial position make the oil and gas industry an attractive investment.
Considering these conducive trends, let’s discuss the fundamentals of the three featured Energy - Oil & Gas stocks, starting with number three.
Stock #3: Obsidian Energy Ltd. (OBE)
Headquartered in Calgary, Canada, OBE engages in the exploration, production, and development of oil and natural gas properties in Western Canada.
On June 26, 2024, OBE announced the completion of its $80.5 million acquisition of Clearwater production and land in Peace River, enhancing its regional holdings. The acquisition includes approximately 1,700 boe/d of production and 148 net sections of land, funded by a bank facility and a term loan.
On June 11, 2024, OBE announced a new agreement with the Woodland Cree First Nation and resumed production at its Harmon Valley South field. The agreement, effective through 2025, follows the field's shutdown in May 2024 due to a conflict with the WCFN.
In terms of forward non-GAAP P/E, OBE’s 4.76x is 59.7% lower than the 11.83x industry average. Its 1.33x forward EV/Sales is 34.4% lower than the 2.03x industry average. Similarly, its 2.26x forward EV/EBITDA is 62.2% lower than the 5.99x industry average.
OBE’s EBITDA grew at a CAGR of 38.2% over the past three years. Its EBIT grew at a CAGR of 47.1% over the past three years. Moreover, its revenue grew at a CAGR of 26.1% over the past three years.
In the second quarter that ended June 30, 2024, OBE’s net income stood at CAD37.10 million ($27.49 million) and CAD0.46 per share, up 101.6% and 109.1% over the prior-year quarter. Likewise, the company’s free cash flow increased 20.9% year-over-year to CAD52 million ($38.53 million).
For fiscal 2024, OBE’s EPS and revenue are expected to increase 52% and 13.3% year-over-year to $1.44 and $605.55 million, respectively. OBE’s stock has gained 1.3% year-to-date to close the last trading session at $6.87.
OBE’s POWR Ratings reflect this positive outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Energy - Oil & Gas industry, it is ranked #5 out of 79 stocks. It has a B grade for Value and Sentiment. To see the other ratings of OBE for Growth, Momentum, Stability, and Quality, click here.
Stock #2: Energy Transfer LP (ET)
ET provides energy-related services. It owns and operates approximately 11,600 miles of natural gas transportation pipeline, three natural gas storage facilities, and two natural gas storage facilities in Texas and Oklahoma. Additionally, it manages 19,945 miles of interstate natural gas pipeline.
On July 16, 2024, ET and Sunoco announced a joint venture to combine their Permian Basin crude oil and water gathering assets, with ET holding a 67.5% interest and serving as the operator. The venture will manage over 5,000 miles of pipelines and 11 million barrels of storage capacity.
On July 15, 2024, ET announced the completion of its $2.28 billion acquisition of WTG Midstream, expanding its Permian Basin pipeline network with 6,000 miles of gas-gathering pipelines and eight processing plants. This acquisition is expected to boost distributable cash flow per unit starting in 2025.
In terms of forward Price/Sales, ET’s 0.62x is 56.3% lower than the 1.42x industry average. Likewise, its 0.78x forward non-GAAP PEG is 47.6% lower than the 1.49x industry average. Also, its 1.61x forward Price/Book is 1.5% lower than the 1.63x industry average.
ET’s revenue grew at a CAGR of 17.1% over the past three years. Its EBITDA grew at a CAGR of 3.3% over the past three years. Moreover, its net income grew at a CAGR of 5.8% over the past three years.
ET’s revenues for the second quarter that ended June 30, 2024, rose 13.2% year-over-year to $20.73 billion. Its operating income grew 25% from the year-ago value to $2.30 billion. For the same quarter, ET’s net income came in at $1.99 billion, up 61.8% from the prior year’s quarter. In addition, the company’s net income per common unit increased 40% year-over-year to $0.35.
Street expects ET’s EPS for the quarter ending September 30, 2024, to increase 120.3% year-over-year to $0.33, and its revenue for the same quarter is expected to increase 13.2% year-over-year to $23.47 billion. Over the past year, the stock has gained 18.8% to close the last trading session at $16.10.
ET’s POWR Ratings reflect its solid fundamentals. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It is ranked #4 in the same industry. It has an A grade for Growth and a B for Value, Momentum, and Stability. Click here to see the other ratings of ET for Sentiment and Quality.
Stock #1: PrimeEnergy Resources Corporation (PNRG)
PNRG and its subsidiaries engage in the acquisition, development, and production of oil and natural gas properties. The company owns leasehold, mineral, and royalty interests in producing and non-producing oil and gas properties, operates approximately 534 active wells, and holds non-operating interests and royalties in 952 additional wells.
In terms of trailing-12-month EV/Sales, PNRG’s 1.30x is 39.9% lower than the 2.16x industry average. Its 2.29x trailing-12-month EV/EBITDA is 64.4% lower than the 6.44x industry average. Likewise, its 4.16x forward EV/EBIT is 62.2% lower than the 10.99x industry average.
PNRG’s revenue grew at a CAGR of 45.7% over the past three years. Its total assets grew at a CAGR of 19% over the past three years. Moreover, its EBITDA grew at a CAGR of 89% over the past three years.
During the second quarter that ended June 30, 2024, PNRG’s revenues increased 81.5% year-over-year to $64.83 million. The company’s net income and EPS came in at $19.73 million and $7.77, indicating growth of 95.6% and 103.4% from the year-ago values, respectively.
Over the past year, the stock has gained 37.1% to close the last trading session at $133.02.
PNRG’s POWR Ratings reflect its bright prospects. It has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Growth, Sentiment, and Quality. Within the Energy - Oil & Gas industry, it is ranked #2 out of 79 stocks. To access PNRG’s additional grades for Value, Momentum, and Stability, click here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
ET shares were trading at $16.10 per share on Tuesday afternoon, down $0.00 (0.00%). Year-to-date, ET has gained 24.11%, versus a 17.10% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
3 Oil & Gas Stocks Offering Both Value and Growth StockNews.com
