Oil prices rebounded from early session losses on Wednesday, supported by the lower-than-expected inflation data. Brent crude futures rose 1.1% to settle at $97.40 a barrel, while U.S. West Texas Intermediate crude futures gained $1.43 to $91.93.
Also, the International Energy Agency (IEA) revised its 2022 estimates for global demand growth by 380 kb/d to 2.10 mb/d. The IEA cited rising oil use for power generation for the upward revision. World oil demand is forecasted to be 99.70 mb/d in 2022 and 101.80 mb/d in 2023.
Moreover, the United States is due to stop releasing strategic petroleum reserves, while Chinese demand should grow as lockdowns ease, and the European Union’s ban on Russian oil is anticipated to take effect, which is expected to add to the supply-demand imbalances. In addition, the market is expected to tighten as winter approaches, which might drive oil prices to $120 a barrel.
Given this backdrop, fundamentally strong oil stocks flying under the radar, Adams Resources & Energy, Inc. (AE), TotalEnergies SE (TTE), and Cenovus Energy Inc. (CVE) might be solid buys now.
Adams Resources & Energy, Inc. (AE)
AE markets, transports, and engages in the terminaling and storage of various crude oil and natural gas basins. The company operates through its three broad segments Crude Oil Marketing, Transportation and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminaling and Storage of Crude Oil.
In May, AE declared a quarterly dividend for the first quarter of 2022 of $0.24 per common share, which was payable to shareholders on June 17. This reflects upon the company’s cash generation ability.
AE’s revenue increased 137.9% year-over-year to $774.25 million in the first quarter ended March 31. Its operating earnings grew 111.6% from the year-ago value to $8.15 million, while its net earnings improved 116.9% year-over-year to $6.09 million. The company’s net earnings per common share increased 110.6% from its year-ago value to $1.39.
The consensus EPS estimate of $3.46 for the fiscal year ending December 2022 indicates a 25.8% improvement year-over-year. The consensus revenue is expected to be $3.12 billion for the same period.
The stock has gained 35.3% over the past year and 28.8% year-to-date to close its last trading session at $35.83.
AE’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AE is rated an A in Momentum and a B in Value, Sentiment, and Quality. Within the B–rated Energy - Oil & Gas industry, it is ranked #4 out of 97 stocks. Click here to see the additional POWR Ratings for Growth and Stability for AE.
TotalEnergies SE (TTE)
TTE is an integrated oil and gas company operating worldwide. The company operates through the Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services segments. It is headquartered in Courbevoie, France.
On July 29, TTE and ADNOC further strengthened their partnership by signing an agreement by ADNOC to acquire a 50% stake in TotalEnergies Marketing Egypt LLC for a consideration of approximately $200 million. The rich experience of ADNOC is expected to bring a significant added value to TotalEnergies Marketing Egypt.
On July 28, TTE announced the launch of the Begonia oil field, Quiluma, and Maboqueiro gas fields developments and its first photovoltaic project in Angola. These projects are expected to enhance the company’s operative capability.
TTE’s adjusted revenues from sales came in at $70.46 billion for the second quarter ended June 30, representing a 69.2% year-over-year growth. Its adjusted consolidated net income grew 178.4% from the prior-year quarter to $9.89 billion, while its cash flow from operations rose 115.7% from the same period last year to $16.28 billion. The EPS of the company increased 170% from the prior-year period to $2.16.
Analysts expect TTE’s revenue for the third quarter ending September 2022 to be $69.24 billion, indicating a 41.1% year-over-year growth. The company’s EPS for the same quarter is expected to increase 102.7% from the prior-year quarter to $3.57. Additionally, TTE has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
TTE has gained 18.6% over the past year and 4.6% over the past month to close its last trading session at $52.44.
The company has an overall B rating, which translates to Buy in our proprietary rating system. TTE has an A grade for Momentum and a B for Sentiment. It is ranked #11 in the Energy - Oil & Gas industry.
Beyond what we’ve stated above, we have also given TTE grades for Growth, Value, Stability, and Quality. Get all TTE ratings here.
Cenovus Energy Inc. (CVE)
CVE develops, produces, and markets crude oil, natural gas liquids, and natural gas in Canada, the United States, and the Asia Pacific region. The company operates through Oil Sands; Conventional; Offshore; Canadian Manufacturing; U.S. Manufacturing; and Retail segments. CVE is headquartered in Calgary, Canada.
On August 8, CVE, through its U.S. operating business, reached an agreement to purchase BP p.l.c’s (BP) 50% interest in the BP-Husky Toledo Refinery in Ohio. “Fully owning the Toledo Refinery provides a unique opportunity to further integrate our heavy oil production and refining capabilities,” said Alex Pourbaix, CVE’s President & CEO.
In June, CVE announced that it had agreed to purchase the remaining 50% of the Sunrise oil sands project in northern Alberta from BP. This is expected to benefit from the significant optimization opportunities.
CVE’s revenue in the second quarter ended June 30 amounted to CAD19.17 billion ($14.94 billion), representing a growth of 80.2% from its prior-year quarter. Its cash from operating activities increased 117.6% year-over-year to CAD2.98 billion ($2.32 billion), while its net earnings improved 985.7% year-over-year to CAD2.43 billion ($1.89 billion). The company’s net earnings per common share increased 981.8% from its year-ago value to CAD1.19.
Street expects CVE’s revenue for the third quarter ending September to be $17.51 billion, indicating a 61.6% year-over-year growth. The company’s EPS for the same quarter is expected to increase 199.7% from the prior-year quarter to $0.93.
The stock has gained 110.6% over the past year and 41.1% year-to-date to close its last trading session at $17.33.
It is no surprise that CVE has an overall B rating, which translates to Buy in our POWR Ratings system. The stock has an A grade for Momentum and a B for Growth, Value, and Sentiment. It is ranked #19 in the same industry.
Beyond what we’ve stated above, we have also given CVE grades for Stability and Quality. Get all CVE ratings here.
AE shares were trading at $34.74 per share on Thursday afternoon, down $1.09 (-3.04%). Year-to-date, AE has gained 26.64%, versus a -10.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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