Oil and gas prices remained volatile through 2024, fueled by disruption caused by production cuts from OPEC+ and geopolitical and economic tensions among major economies. Further, recent technological advancements and improving production capabilities are navigating the industry players’ growth.
Against this backdrop, investors could consider investing in fundamentally sound oil and gas stocks VAALCO Energy, Inc. (EGY), Suncor Energy Inc. (SU), and Energy Transfer LP (ET), poised to surge with rising energy prices.
This week, oil prices settled at a higher level after the U.S. crude inventories fell and the U.S. Federal Reserve announced interest rates cut. Brent futures were up by 20 cents, or 0.27%, totaling $73.39 a barrel. Also, U.S. West Texas Intermediate crude settled up 50 cents, or 0.71%, reaching $70.58.
According to EIA’s recent short-term energy outlook, next year, global oil production growth is mostly expected to be drawn from non-OPEC countries amid the ongoing production cuts from OPEC+, which has further extended its production increases until April 2025. EIA projects global oil production growth by 1.6 million barrels per day (b/d) in 2025, stemming its growth of almost 90% from non-OPEC+.
Further, based on the expectation that the natural gas inventory surplus will narrow over the winter, it is projected that the U.S. benchmark Henry Hub spot price will increase $2.00 per million British thermal units (MMBtu) in November and at an average of about $3.00/MMBtu for the rest of the winter heating season.
Over the long run, the oil and gas market outlook appears promising. Statista projects that by 2045, primary energy consumption will hit around 364 million barrels of oil equivalent per day. In the coming years, oil and gas will continue to remain in key roles, contributing 110 and 90 million barrels of oil equivalent per day, respectively.
The essential nature of the energy industry, technological advancements, enhanced production efficiencies, and strong global demand position oil and gas stocks as a favorable choice for investors.
Considering these conducive trends, let’s delve into the fundamentals of the top Energy – Oil & Gas stocks, beginning with the third choice.
Stock #3: VAALCO Energy, Inc. (EGY)
EGY is an independent energy company engaged in the acquisition, exploration, development, and production of crude oil, natural gas, and natural gas liquids in Gabon, Egypt, Equatorial Guinea, and Canada. The company holds a 58.8% interest in Etame commercial production.
On December 11, EGY executed a contract with Borr Jack-Up XIV Inc., an affiliate of Borr Drilling Limited, to drill multiple development wells and appraisal/exploration wells and perform workovers with options to drill additional wells. The announcement was made in conjunction with its 2025/2026 drilling program, which is planned to begin in mid-2025 in Gabon.
On November 11, EGY declared its quarterly cash dividend of $0.0625 per share of common stock for the fourth quarter of 2024, payable on December 20, 2024, to stockholders of record at the close of business on November 22, 2024. EGY’s annual dividend of $0.25 translates to a yield of 5.71% at the current share price. Its four-year average dividend yield is 2.46%.
EGY’s total net revenue rose 20.7% from the year-ago value to $140.33 million during the third quarter that ended September 30, 2024. Its operating income increased 24% year-over-year to $44.08 million. Also, EGY’s adjusted net income came in at $7.93 million and $0.08 per share, up 6.2% and 14.3% from the prior year’s quarter, respectively.
Additionally, the company’s adjusted EBITDAX of $92.76 million indicates growth of 30% from the prior year’s quarter.
Street expects EGY’s revenue to increase 2% year-over-year to $102.11 million for the first quarter (ending March 2025). For the fiscal year 2024, the company’s revenue is expected to grow 8% year-over-year to $491.44 million. Also, it has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.
EGY’s stock has declined 4.5% year-to-date to close the last trading session at $4.29.
EGY’s bright prospects are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has an A grade for Quality and a B grade for Value. EGY is ranked #17 among 76 stocks in the Energy – Oil & Gas industry.
Click here to access additional EGY ratings for Sentiment, Momentum, Growth, and Stability.
Stock #2: Suncor Energy Inc. (SU)
Headquartered in Calgary, Canada, SU operates as an integrated energy company internationally. The company operates through Oil Sands; Exploration and Production; and Refining and Marketing segments. The company explores, develops, and produces bitumen, synthetic crude oil, and related products.
On November 12, SU’s Board of Directors approved a quarterly dividend of $0.57 per common share, representing an increase of around 5% over the prior quarterly dividend. The dividend will be paid on December 24, 2024, to shareholders of record at the close of business on December 3, 2024.
SU pays an annual dividend of $1.58, which translates to a yield of 4.59% at the current share price. Its four-year average dividend yield is 3.99%. Moreover, the company’s dividend payouts have increased at a CAGR of 24.5% over the past three years. SU has raised its dividends for four consecutive years.
In the third quarter that ended September 30, 2024, SU’s net earnings amounted to CAD 2.02 billion ($1.40 billion) and CAD 1.59 per common share, up 30.8% and 33.6% over the prior-year quarter, respectively. The company’s adjusted funds from operations were CAD 3.79 billion ($2.63 billion) or CAD 2.98 per common share, reflecting increases of 4.2% and 6.4% year-over-year, respectively.
In addition, the company’s free funds flow increased 8.5% year-over-year to CAD 2.23 billion ($1.55 billion).
SU’s stock has surged 7.7% over the past year to close the last trading session at $34.61.
SU’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Quality. It also has a B grade for Stability and Momentum. Within the same industry, SU is ranked #11 out of 76 stocks.
In addition to the POWR Ratings I’ve just highlighted, you can see SU’s Growth, Value, and Sentiment ratings here.
Stock #1: Energy Transfer LP (ET)
ET provides energy-related services. It owns and operates natural gas transportation pipelines and natural gas storage facilities in Texas and Oklahoma and approximately 20,090 miles of interstate natural gas pipeline. It also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
On October 28, ET increased its quarterly cash distribution to $0.3225 per common unit for the third quarter that ended September 30, 2024, reflecting an increase of 3.2% from the third quarter of 2023. The cash distribution was paid on November 19, 2024, to unitholders of record as of the close of business on November 8, 2024.
ET pays a $1.29 annual dividend yielding 7.09% at the current share price. Its four-year average dividend yield is 8.01%. Also, the company’s dividends have increased at a 27.9% CAGR over the past three years.
During the third quarter that ended September 30, 2024, ET’s revenues increased marginally year-over-year to $20.77 billion, and its operating income came in at $2.18 billion for the same quarter. Also, the company reported a net income of $1.43 billion or $0.32 per common unit, up 37% and 113.3% from the previous year’s period, respectively.
Further, ET’s adjusted EBITDA increased 11.8% from the year-ago value to $3.96 billion. Also, its distributable cash flow was up 4.7% from the prior year to $2.63 billion.
Analysts expect ET’s revenue for the fourth quarter (ending December 2024) to increase 5.6% year-over-year to $21.68 billion, and its EPS is expected to grow 2.3% year-over-year to $0.38 in the same quarter.
The stock has soared 16.4% over the past six months and 31.7% over the past year to close the last trading session at $18.27.
ET’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 an A grade for Momentum and a B for Stability and Value. Within the Energy – Oil & Gas industry, ET is ranked #5 out of 76 stocks.
Click here to access additional ratings of ET for Growth, Sentiment, and Quality.
What To Do Next?
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ET shares were trading at $18.70 per share on Friday afternoon, up $0.43 (+2.35%). Year-to-date, ET has gained 46.87%, versus a 26.02% 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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