Crude prices had come under pressure as concerns about fuel demand were stoked when protests against COVID-19 lockdowns broke out in China. Markets also appeared volatile ahead of an OPEC+ meeting and a looming G7 price cap on Russian oil.
However, the EU embargo on Russian crude imports is effective next month, and a price cap on Russian oil purchases could increase oil prices. For some traders, oil market uncertainties are so significant that they are betting that oil could reach $200 per barrel.
Moreover, the Energy Select Sector SPDR Fund (XLE) has gained 65.5% year-to-date, while the broader S&P 500 index has lost 15.5%, indicating investor sentiments favoring the energy sector.
Furthermore, the U.S. Energy Information Administration (EIA) forecasted that global oil consumption would outpace global oil production in 2023, which would contribute to increasing oil prices in the second half of 2023.
In this backdrop, it might be wise to buy fundamentally strong energy stocks Valero Energy Corporation (VLO), Berry Corporation (BRY), Unit Corporation (UNTC), and Adams Resources & Energy, Inc. (AE) now, which could help power your portfolio in 2023.
Valero Energy Corporation (VLO)
VLO manufactures, markets, and sells transportation fuels and petrochemical products. The company operates through its three broad segments – Refining; Renewable Diesel; and Ethanol.
On October 26, VLO announced a regular quarterly dividend on the common stock of $0.98 per share, payable to shareholders on December 8. This reflects upon the solid cash generation ability of the company.
In September, VLO announced that it had reduced its debt by approximately $1.25 billion through its previously announced tender offers for various series of senior notes. The company also declared a collective debt reduction of about $3.60 billion through transactions in the second half of 2021 and the first half of 2022.
In the fiscal 2022 third quarter ended September 30, VLO’s revenues increased 50.6% year-over-year to $44.45 billion. Its operating income grew 447.2% year-over-year to $3.79 billion.
Furthermore, adjusted net income attributable to VLO stockholders and adjusted earnings per common share came in at $2.80 billion and $7.14, registering increases of 413% and 436.8% from the prior-year period, respectively.
Analysts expect VLO’s revenue for the fiscal fourth quarter (ending December 2022) to come in at $43.75 billion, representing an increase of 21.9% year-over-year. The consensus EPS estimate of $6.84 for the ongoing quarter indicates a 177% year-over-year increase.
Moreover, VLO has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
Shares of VLO have gained 84.3% year-to-date and 103.5% over the past year to close the last trading session at $138.40.
VLO has an overall rating of A, equating to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
VLO has a grade of A for Momentum and B for Growth, Value, and Quality. VLO is ranked #6 out of 92 stocks in the B-rated Energy – Oil & Gas industry.
Beyond what is stated above, we have also given VLO grades for Sentiment and Stability. Get access to all VLO ratings here.
Berry Corporation (BRY)
BRY is an independent upstream energy company that develops and produces conventional oil reserves in the western United States. It operates in two segments, Development and Production and Well Servicing and Abandonment.
On November 2, 2022, Cary Baetz, BRY’s Executive Vice President and CFO, said, “With our well-defined Shareholder Return Model, we expect to deliver top-tier returns of capital to our shareholders.”
The company’s board of directors declared dividends totaling $0.47 per share on its outstanding common stock. The variable and fixed portion of the dividends are payable on November 28, 2022, to shareholders.
BRY’s total revenues and other came in at $376.45 million for the third quarter that ended September 30, 2022, up 162.5% year-over-year. Its adjusted net income came in at $45.52 million, up 294.5% year-over-year. Also, its earnings per share on adjusted net income came in at $0.55, up 292.9% year-over-year.
BRY’s revenue is expected to increase by 59.9% year-over-year to $871.45 million in the fiscal year ending December 2022. Its EPS is expected to grow 726% year-over-year to $2.07 in the same period. BRY has topped Street EPS and revenue estimates in three out of the trailing four quarters, which is impressive.
BRY’s shares have gained 7% year-to-date to close the last trading session at $9.01. It has also gained 8.9% over the past five days.
BRY’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a Strong Buy in our POWR Ratings system.
It has an A grade for Value and Momentum and a B for Growth. It is ranked #8 in the same industry.
Click here to see BRY’s additional POWR Ratings for Stability, Sentiment, and Quality.
Unit Corporation (UNTC)
UNTC explores, acquires, develops, and operates oil and natural gas properties in the United States. The company operates through its three broad segments: Oil and Natural Gas; Contract Drilling; and Mid-Stream.
For the fiscal quarter ended September 30, UNTC’s income from operations rose 39% from the prior-year quarter to $66.26 million. Net income attributable to UNTC and its per common share value came in at $55.82 million and $5.60 per share, which increased 786.7% and 918.2% year-over-year, respectively.
Shares of UNTC have gained 79% year-to-date to close the last trading session at $57.80. Moreover, it has gained 3.7% over the past month.
It’s no surprise that UNTC has an overall POWR Ratings of A, translating to a Strong Buy in our proprietary rating system.
UNTC also has a grade A for Value, Momentum, and Quality. The stock is ranked #7 in the same industry.
For additional ratings on Growth, Stability, and Sentiment for UNTC, click here.
Adams Resources & Energy, Inc. (AE)
AE engages in the marketing, transportation, and storing of various U.S. crude oil and natural gas basins. The company has three operational segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gases, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.
On November 1, AE announced the repurchase of all of the shares of Adams common stock owned by KSA Industries, Inc. The total purchase price was approximately $70 million or $36 per share and is expected to be funded by a combination of existing cash on hand and a new term loan.
Along with the company’s recent acquisitions, repurchasing of shares is expected to enhance the value for all remaining shareholders. Kevin Roycraft, Chief Executive Officer of the company, said, “The company will also see an immediate annual savings of roughly $1.9 million in dividend payments at the current dividend rate.”
On November 10, AE declared a quarterly cash dividend for the third quarter of 2022 of $0.24 per common share, payable on December 16 to shareholders. The company has consistently paid a dividend since 1994. This reflects the shareholder return ability of the company.
For the fiscal third quarter ended September 30, 2022, AE’s total revenues increased 50.1% year-over-year to $852.90 million. Its operating earnings grew 30.1% from its prior-year quarter to $2.99 million, while its net earnings grew 41.7% from its year-ago value to $2.19 million. The company’s net earnings per common share improved by 38.9% from its year-ago value of $0.50.
The consensus EPS estimate of $3.37 for the year ending December 2022 represents a 22.6% improvement year-over-year.
The stock has gained 44.2% year-to-date and 16.3% over the past six months to close the last trading session at $40.10.
AE’s POWR Ratings reflect its promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock also has an A grade for Momentum and Sentiment and a B for Value and Quality. Within the same industry, it is ranked #4.
Click here to see additional POWR Ratings for AE (Stability and Growth).
VLO shares were trading at $136.25 per share on Monday afternoon, down $2.15 (-1.55%). Year-to-date, VLO has gained 87.90%, versus a -15.57% 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.
4 Energy Stocks to Buy Now to Help Power Your Portfolio in 2023 StockNews.com
