The energy sector showcased resilience, even though several economic and geopolitical challenges marred the performance of the other industries. The industry is well-placed to thrive in the upcoming months, owing to the recent uptick in oil demand and simultaneous supply constraints, driving up oil prices.
To that end, let us probe into oil stocks Equinor ASA (EQNR), YPF Sociedad Anónima (YPF), and GeoPark Limited (GPRK) now.
Before we delve deeper into the fundamentals of the stocks mentioned above, let us discuss the recent developments in the oil and gas sector.
China’s economic reopening is anticipated to boost the demand for oil and gas. As per IEA’s latest report, global oil demand is set to reach an average of 102 mb/d in 2023, representing an increase of 1.3 mb/d compared to the demand levels seen in 2019.
According to Wood Mackenzie, the oil and gas exploration and production industry is expected to allocate a capital outlay of $470 billion in 2023 to uplift the sector amid a challenging economic scenario.
Moreover, as a result of the OPEC+ oil production cut continuation until the end of 2024, the U.S. Energy Information Administration (EIA) forecasted upward pressure on crude oil prices. Also, Saudi Arabia’s voluntary oil production cuts by 1 million bpd in July until the end of 2023 could prop up prices.
ANZ analysts Daniel Hynes and Soni Kumari reiterated their $100 per barrel Brent target for the end of the year and said, “Investors are likely to add bullish bets, comfortable that Saudi Arabia and OPEC will provide a backstop should the market hit any hurdles.” Thus, oil markets are anticipated to be tighter in the year’s second half.
The rising oil prices make this an opportune time for investors to take a closer look at energy stocks. Given this backdrop, quality oil stocks EQNR, YPF, and GPRK could be watched now.
Equinor ASA (EQNR)
Headquartered in Stavanger, Norway, EQNR is an energy company that engages in the exploration, production, transportation, refining, and marketing of petroleum and other forms of energy in Norway and internationally.
From May 29 to June 2, EQNR purchased a total of 2,117,395 own shares at the Oslo Stock Exchange at an average price of NOK288.2593 per share. After the completion of its buyback, EQNR owns a total of 70,717,703 own shares, corresponding to 2.23% of EQNR’s share capital, including shares under EQNR’s share savings program.
EQNR paid an ordinary quarterly dividend of $0.30 per share and an extraordinary dividend of $0.60 per share on May 25, 2023. EQNR pays a $1.20 per share dividend annually, which translates to a 4.31% yield on the current share price. Its four-year average dividend yield is 4.89%.
EQNR completed nine exploration wells offshore with three commercial discoveries in the quarter, and three wells were ongoing at the quarter’s end. EQNR was awarded 26 new production licenses on the NCS.
EQNR’s forward non-GAAP P/E of 6.01x is 32.4% lower than the industry average of 8.89x. Its forward EV/Sales and EV/EBITDA multiple of 0.53 and 1.21 are 72% and 75.8% lower than the industry averages of 1.88 and 5%, respectively.
EQNR’s trailing-12-month EBIT and levered FCF margins of 47.83% and 29.62% are 87.3% and 401.3% higher than the industry averages of 25.54% and 5.91%, respectively. Likewise, its trailing-12-month cash from operations of $34.24 billion is significantly higher than the industry average of $634.20 million.
For the fiscal first quarter that ended March 31, 2023, EQNR’s net operating income came in at $12.52 billion. The company’s net income increased 5.3% year-over-year to $4.97 billion.
EQNR’s cash and cash equivalents stood at $17.92 billion as of March 31, 2023, compared to $15.58 billion as of December 31, 2022. Its total current liabilities stood at $38.20 billion as of March 31, 2023, compared to $43.53 billion as of December 31, 2022.
For the fiscal year ending December 2023, Street expects EQNR’s revenue and EPS to come in at $123.90 billion and $4.64, respectively.
The stock gained 3.4% intraday to close its last trading session at $27.86. Over the past five days, the stock has gained 7.9%.
EQNR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has an A grade for Momentum and Quality. EQNR is ranked #2 of 42 stocks in the B-rated Foreign Oil & Gas industry.
Click here to see the other ratings for EQNR’s Growth, Value, Stability, and Sentiment.
YPF Sociedad Anónima (YPF)
Headquartered in Buenos Aires, Argentina, YPF engages in the oil and gas upstream and downstream activities in Argentina. The company had interests in 116 oil and gas fields; approximately 606 million barrels of oil and approximately 2,826 billion cubic feet of gas.
YPF’s forward non-GAAP P/E of 3.43x is 61.5% lower than the industry average of 8.89x. Its forward EV/Sales and EV/EBITDA multiples of 0.90 and 3.48 are 52.1% and 30.3% lower than the industry averages of 1.88 and 5%, respectively.
YPF’s trailing-12-month CAPEX /Sales and asset turnover ratio of 23.62% and 0.73x are 89.1% and 11.2% higher than the industry averages of 12.49% and 0.65x, respectively.
During the fiscal first quarter that ended March 31, 2023, YPF’s revenues increased 12.7% year-over-year to $4.24 billion. The company’s operating profit stood at $335 million for the same quarter.
Its net profit increased 27.7% year-over-year to $341 million. Earnings per share attributable to shareholders of the parent company stood at ARS149.60, up 121% year-over-year.
Street expects YPF’s revenue and EPS to come in at $17.41 billion and $3.66, respectively, in the fiscal year ending December 2023. It surpassed the consensus revenue and EPS estimates in each of the four trailing quarters, which is impressive.
Over the past year, the stock has gained 186.1% to close the last trading session at $12.53. Over the past five days, it has gained 11%.
YPF’s positive outlook is reflected in its POWR Ratings. It has an overall B rating, equating to Buy in our proprietary rating system.
It has an A grade for Value and Momentum and a B for Growth. It is ranked #3 in the same industry.
Beyond what is stated above, we’ve also rated YPF for Stability, Sentiment, and Quality. Get all YPF ratings here.
GeoPark Limited (GPRK)
Headquartered in Bogotá, Colombia, GPRK is engaged in developing and producing oil and gas reserves in Chile, Colombia, Brazil, Argentina, and Ecuador.
On May 3, GPRK announced a quarterly dividend of $0.13 per share paid to the shareholders on May 31. GPRK pays a $0.52 per share dividend annually, which translates to a 4.87% yield on the current share price. Its four-year average dividend yield is 1.25%. The company’s dividend payouts have grown at a CAGR of 131.7% over the past three years.
In April, GPRK implemented a restructuring initiative in Chile to provide cost reductions, in conjunction with a process to evaluate farm-out/divestment opportunities.
GPRK’s forward non-GAAP P/E of 4x is 55% lower than the industry average of 8.89x. Its forward EV/EBIT multiple of 2.85 is 65.3% lower than the industry average of 8.22.
GPRK’s trailing-12-month levered FCF margin of 23.34% is 295.1% higher than the industry average of 5.91%. Its trailing-12-month ROCE of 471.34% is significantly higher than the industry average of 23.77%.
In the fiscal first quarter (ended March 31, 2023), GPRK’s revenue stood at $182.50 million. Its operating profit grew 30.7% from its year-ago value to $76.60 million, while its profit came in at $26.30 million. Moreover, its cash and cash equivalents for the same quarter stood at $145.40 million, up 27.4% year-over-year.
The company’s total current asset stood at $243.60 million as of March 31, 2023, compared to $238.10 million as of December 31, 2022. Also, the company’s net debt stood at $346.20 million as of March 31, 2023, compared to $368.80 million as of December 31, 2022.
The consensus revenue and EPS estimate stood at $807.95 million and $2.67, respectively, for the fiscal year ending December 2023. Analysts expect its revenue and EPS for the fiscal year ending December 2024 to increase 6.5% and 11.1% year-over-year to $860.29 million and $2.97, respectively.
It surpassed the consensus revenue estimates in three of the four trailing quarters.
GPRK’s shares have surged 4.3% intraday to close its last trading session at $10.68. Moreover, it has gained 5% over the past month.
It is no surprise that GPRK has an overall B rating, equating to Buy in our POWR Ratings system.
GPRK has an A grade for Value and a B for Quality. In the same industry, it is ranked #14.
Click here to see GPRK’s additional POWR Ratings for Growth, Momentum, Stability, and Sentiment.
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EQNR shares were trading at $28.08 per share on Thursday morning, up $0.22 (+0.79%). Year-to-date, EQNR has declined -17.54%, versus a 12.37% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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