Amid escalating tension between Russia and Ukraine, OPEC+ members recently announced their decision to cut oil production by 2 million barrels /day, citing an uncertain global economic outlook. This move is expected to set oil prices soaring in the near term.
“Due to the decision, volatility will likely return to the market, and despite concerns about the resilience of the global economy, the oil market is tight, all of which should serve as a tailwind for prices in the fourth quarter,” Rohan Reddy, director of research at Global X ETFs said.
Moreover, JPMorgan expects the price of Brent crude to hit $100 /barrel soon. In addition, the oil and gas market is projected to grow at a CAGR of 6.4% from 2022 to 2026.
Given the backdrop, fundamentally sound energy stocks TotalEnergies SE (TTE), Marathon Petroleum Corporation (MPC), Valero Energy Corporation (VLO), Energy Transfer LP (ET), and APA Corporation (APA) could be ideal investments.
TotalEnergies SE (TTE)
Headquartered in Courbevoie, France, TTE operates as an integrated oil and gas company worldwide. The company operates through four segments: Integrated Gas; Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services.
On September 26, 2022, TTE signed a new investment deal in Qatar’s natural gas production expansion. The company is expected to have a 9.3% stake in the North Field South gas project, becoming the first foreign partner in that section.
TTE’s sales came in at $74.77 billion for the second quarter that ended June 30, 2022, up 58.9% year-over-year. Its net income increased 152.46% year-over-year to $5.80 billion. Moreover, the company’s EPS increased 170% year-over-year to $2.16.
Analysts expect TTE’s revenue to increase 28.1% year-over-year to $263.81 billion in 2022. Its EPS is estimated to increase 114.2% year-over-year to $14.31 in 2022. It surpassed EPS estimates in all four trailing quarters. TTE’s shares have lost marginally intraday to close the last trading session at $48.32.
TTE’s POWR Ratings reflect its solid prospects. It has an overall rating of B, equating to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
TTE has an A grade for Momentum and a B for Sentiment. It is ranked #13 out of 94 stocks in the B-rated Energy - Oil & Gas industry. Click here to access the additional POWR Ratings for TTE (Value, Growth, Stability, and Quality).
Marathon Petroleum Corporation (MPC)
MPC and its subsidiaries primarily operate as an integrated downstream energy company in the United States. It operates in two segments: Refining & Marketing; and Midstream.
On August 2, 2022, President and CEO Michael J.Hennigan said, “We accomplished a lot during the quarter, our team delivered on supplying products to meet strong market demand. Utilizing the proceeds from the Speedway divestiture, we have completed approximately $12 billion of our $15 billion return of capital program.”
MPC’s total revenues and other income came in at $54.24 billion for the second quarter that ended June 30, 2022, up 81.8% year-over-year. Its sales and other operating revenues increased 81.6% year-over-year to $53.80 billion. Moreover, the company’s income from continuing operations increased 763% year-over-year to $8.33 billion.
Street expects MPC’s revenue to increase 43% year-over-year to $172.97 billion in 2022. Its EPS is estimated to increase 814.7% year-over-year to $22.41 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 62.1% to close the last trading session at $104.96.
It’s no surprise that MPC is rated Strong Buy in our POWR Ratings system. In addition, it has an A grade for Growth, Momentum, and Quality. It is ranked #4 in the same industry. Click here to access the additional POWR Ratings for MPC (Stability, Value, and Sentiment).
Valero Energy Corporation (VLO)
VLO manufactures, markets, and sells transportation fuels and petrochemical products in the United States, Canada, the United Kingdom, Ireland, and internationally. The company operates through three segments: Refining; Renewable Diesel; and Ethanol.
On July 28, 2022, Joe Gorder, VLO’s Chairman, and CEO, said, “We continue to maximize refinery run rates, while executing our long-standing commitment to safe, reliable, and environmentally responsible operations.”
VLO’s revenues came in at $51.64 billion for the second quarter that ended June 30, 2022, up 86.1% year-over-year. Its net income increased by 2,796.9% year-over-year to $4.69 billion, while its EPS increased by 2,866.7% year-over-year to $11.57.
VLO’s revenue is estimated to increase 57.1% year-over-year to $179.09 billion in 2022, while its EPS is estimated to increase 800.4% year-over-year to $25.30 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 46% to close the last trading session at $115.20.
VLO’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of A equates to a Strong Buy in our POWR Ratings system.
Also, the stock has an A grade for Growth and Momentum and a B for Value and Quality. It is ranked #6 in the same industry. Click here to access the additional POWR Ratings for VLO (Stability and Sentiment).
Energy Transfer LP (ET)
ET provides energy-related services. The company owns and operates approximately 11,600 miles of natural gas transportation pipeline, three natural gas storage facilities in Texas, two natural gas storage facilities in Texas and Oklahoma, and 19,830 miles of interstate natural gas pipeline.
On August 24, 2022, ET signed a 20-year LNG Sale and Purchase Agreement with Shell NA LNG LLC for its Lake Charles LNG project through its subsidiary, Energy Transfer LNG Export, LLC. Both businesses are projected to gain long-term benefits from this collaboration.
ET’s revenues came in at $25.95 billion for the second quarter that ended June 30, 2022, up 71.8% year-over-year. Its net income increased 111.8% year-over-year to $1.33 billion. In addition, its EPS increased 95% year-over-year to $0.39.
ET’s revenue is expected to increase 32.8% year-over-year to $89.52 billion in 2022. It has surpassed EPS estimates in three of four trailing quarters. Over the past nine months, the stock has gained 19.4% to close the last trading session at $11.50.
ET’s POWR Ratings reflect this promising outlook. It has an overall B rating equates to a Buy in our proprietary rating system. It has an A grade for Momentum and a B grade for Value. It is ranked #35 in the same industry.
We’ve also rated ET for Sentiment, Growth, Stability, and Quality. Get all ET ratings here.
APA Corporation (APA)
APA explores for, develops, and produces oil and gas properties through its subsidiaries. It conducts business in the United States, Egypt, and the United Kingdom and engages in offshore exploration.
On August 3, 2022, John J. Christmann IV, APA’s CEO and President, said, “Our diversified, unhedged portfolio benefitted from high prices across all three product streams, and we managed our largest spending categories – capital investment, operating costs, and general & administrative – very well despite an overall challenging supply chain and cost environment.”
APA’s total revenues came in at $3.05 billion for the second quarter that ended June 30, 2022, up 71.3% year-over-year. Its net income increased 193% year-over-year to $926 million. Moreover, the company’s EPS increased 230.5% year-over-year to $2.71.
Analysts expect APA’s revenue to increase 29% year-over-year to $10.22 billion in 2022. Its EPS is estimated to increase 131.8% year-over-year to $9.04 in 2022. Over the past year, the stock has gained 64.7% to close the last trading session at $40.75.
APA has an overall B grade, equating to a Buy in our POWR Ratings system. Also, it has an A grade for Momentum and Quality and a B for Growth and Value. It is ranked #16 in the same industry. Click here to access APA ratings for Stability and Sentiment.
TTE shares were trading at $50.11 per share on Thursday afternoon, up $1.79 (+3.70%). Year-to-date, TTE has gained 4.36%, versus a -22.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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