The energy industry is poised to thrive in the upcoming months, owing to the uptick in oil demand and simultaneous supply constraints. These factors are driving up oil prices and setting the stage for an industry-wide resurgence.
Given this backdrop, quality energy stocks Petróleo Brasileiro S.A. - Petrobras (PBR), Eni S.p.A. (E), Cheniere Energy Partners, L.P. (CQP), Koninklijke Vopak N.V. (VOPKY), NGL Energy Partners LP (NGL), GeoPark Limited (GPRK), and Martin Midstream Partners L.P. (MMLP) could be wise portfolio additions now.
Despite the shift toward renewable energy, there is an escalating global oil demand due to population growth, industrialization, economic development, and continued implementation of energy-intensive technologies. As per the International Energy Agency, global oil demand is set to rise by 1.2 million barrels per day (bpd) this year compared to 2023. India is poised to be the principal driver of global oil demand growth between 2023 and 2030, narrowly surpassing the top importer, China.
The OPEC anticipates a surge in oil demand by 2.25 million barrels per day to 104.36 million barrels daily in 2024. An increment of 1.85 million barrels per day to 106.21 million barrels daily in 2025 is further projected.
However, potential limitations in supply pose a significant concern amid soaring demand. According to OPEC's predictions, global oil demand growth will significantly exceed non-OPEC supply growth over the next two years. Additionally, slower U.S. oil production could influence oil prices in the foreseeable future.
Simultaneously, geopolitical tensions in the Middle East remain a critical variable in shaping the dynamics of the global oil demand-supply paradigm. Ongoing conflicts in the Red Sea region and the protracted Israel-Gaza war continue to amplify these sensitivities. These confrontations have catalyzed heightened oil prices, pushing Brent to surpass $80 a barrel and West Texas Intermediate (WTI) to exceed $75 a barrel.
The oil and gas market size looks set to maintain an upward trajectory, estimated to reach $7.63 trillion by 2024 and soaring even higher to $9.35 trillion by 2028.
With these favorable trends in mind, let's delve into the fundamentals of the seven oil and gas stock picks.
Petróleo Brasileiro S.A. - Petrobras (PBR)
Headquartered in Rio de Janeiro, Brazil, PBR explores, produces, and sells oil and gas in Brazil and internationally. The company operates through Exploration and Production; Refining, Transportation and Marketing; and Gas and Power.
In 2023, PBR delivered an excellent upstream operational performance, meeting all production forecasts for the year. Total annual production of oil and natural gas came at 2.782 MMboed, up 3.7% year-over-year.
During the fiscal third quarter that ended September 30, 2023, PBR’s sales revenue amounted to $25.55 billion, while gross profit came at $13.57 billion. Its net income for the period stood at $5.48 billion. As of September 30, 2023, the company’s cash and cash equivalents stood at $12.11 billion, compared to $8 billion as of December 31, 2022.
Street expects PBR’s revenue and EPS for the fiscal first quarter ending March 2024 to come at $26.19 billion and $0.94, respectively. The company surpassed consensus EPS estimates in each of the trailing four quarters, which is impressive.
The stock has gained 62.6% over the past year and 66.1% over the past nine months to close the last trading session at $17.24.
PBR’s POWR Ratings reflect its solid outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system. 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 for Momentum. PBR is ranked #15 out of 43 stocks in the B-rated Foreign Oil & Gas industry.
Click here to access additional ratings of PBR for Growth, Value, Stability, and Sentiment.
Eni S.p.A. (E)
Headquartered in Rome, Italy, E explores, extracts, manufactures, and markets crude oil and natural gas, oil-based fuels, chemical products, and energy products from renewable sources. It operates through Exploration & Production; Global Gas & LNG Portfolio (GGP); Refining & Marketing and Chemicals; Plenitude & Power; and Corporate and Other Activities segments.
For the fiscal third quarter that ended September 30, 2023, E’s total revenues came in at €22.65 billion ($24.40 billion). Its adjusted operating profit stood at €3.01 billion ($3.25 billion). The company’s adjusted net profit attributable to E’s shareholders came in at €1.82 billion ($1.96 billion).
Analysts expect E’s revenue for the fiscal first quarter ending March 2024 to increase 19.3% year-over-year to $35.74 billion. For the fiscal year ending December 2024, its revenue is expected to increase 4.6% year-over-year to $108.43 billion, while EPS is expected to be $4.34.
Over the past year, the stock has gained 2.3% to close the last trading session at $30.98. It has gained 3.2% over the past nine months.
E’s POWR Ratings reflect its sound fundamentals. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Momentum and Stability. Within the Foreign Oil & Gas industry, it is ranked #11.
To see the other ratings of E for Growth, Value, Sentiment, and Quality, click here.
Cheniere Energy Partners, L.P. (CQP)
CQP provides liquefied natural gas (LNG) to integrated energy companies, utilities, and energy trading companies worldwide. It owns and operates a natural gas liquefaction and export facility at the Sabine Pass LNG production terminal.
In the fiscal third quarter that ended September 30, 2023, CQP’s total revenues and adjusted EBITDA stood at $2.13 billion and $793 million, respectively. Moreover, its income from operations stood at $988 million, compared to a loss from operations of $299 million in the year-ago quarter.
For the same quarter, net income came at $791 million, compared to a net loss of $514 million in the prior year quarter, while net income per common unit stood at $1.19, compared to a net loss per common unit of $1.49 in the year-ago quarter.
Analysts expect CQP’s revenue and EPS for the fiscal first quarter ending March 2024 to come at $2.60 billion and $1.16, respectively. For the fiscal year ending December 2024, its revenue and EPS are expected to increase 4.9% and 10.6% year-over-year to $9.97 billion and $4.27, respectively.
The stock has gained marginally intraday to close the last trading session at $49.80.
CQP’s POWR Ratings reflect its robust prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
The stock has a B grade for Value, Momentum, and Quality. Within the A-rated MLPs – Oil & Gas industry, it is ranked #6 out of 25 stocks.
For CQP's additional POWR Ratings (Growth, Stability, and Sentiment), click here.
Koninklijke Vopak N.V. (VOPKY)
Headquartered in Rotterdam, the Netherlands, VOPKY is an independent tank storage company. It stores and manages liquid chemicals, gases, and oil products. The company owns and operates terminals, including storage tanks, jetties, truck and rail loading stations, and pipelines, as well as provides access to road, rail, and pipeline networks.
VOPKY’s revenues for the third quarter ended September 30, 2023, rose marginally year-over-year to €352 million ($379.22 million). Its cash flows from operating activities increased 28.4% year-over-year to €245.60 million ($264.59 million). The company’s net profit attributable to holders of ordinary shares rose 79.1% over the prior-year quarter to €144.20 million ($155.35 million), while its EPS came in at €1.15, representing an increase of 79.7% year-over-year.
Analysts expect VOPKY’s revenue for the fiscal year ending December 2024 to come at $1.45 billion.
Over the past year, the stock has gained 4.5% to close the last trading session at $31.65.
VOPKY’s fundamental strength is reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Stability and a B for Growth and Momentum. It is ranked #9 in the Foreign Oil & Gas industry.
In addition to what we have highlighted above, one can see VOPKY's ratings for Value, Sentiment, and Quality here.
NGL Energy Partners LP (NGL)
NGL engages in the transportation, storage, blending, and marketing of crude oil, natural gas liquids, refined products/renewables, and water solutions. The company operates in three segments: Water Solutions, Crude Oil Logistics, and Liquids Logistics.
In the fiscal third quarter, which ended December 31, 2023, NGL generated total revenues of $1.87 billion. Its operating income came at $101.79 million. Its net income attributable to NGL amounted to $45.68 million, while income per share came at $0.08. The company’s adjusted EBITDA stood at $151.67 million.
Analysts expect NGL’s revenue and EPS for the fiscal fourth quarter ending March 2024 to come at $2 billion and $0.13, respectively.
Over the past year, the stock has gained 254% to close the last trading session at $5.77. It gained 110.6% over the past nine months.
NGL’s sound prospects are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Growth, Value, and Momentum. It is ranked #8 in the MLPs - Oil & Gas industry.
Click here for NGL’s additional POWR Ratings (Stability, Sentiment, and Quality).
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.
In the fiscal third quarter (ended September 30, 2023), GPRK’s revenue stood at $192.10 million, while operating profit came at $80.50 million. Its net profit came in at $28.80 million. Moreover, its cash and cash equivalents for the same quarter stood at $106.30 million, up 14.3% year-over-year.
The company’s total current liabilities stood at $191.20 million as of September 30, 2023, compared to $229.20 million as of December 31, 2022.
The consensus revenue and EPS estimate stood at $847.34 million and $2.89, up 9.9% and 21.3% year-over-year, respectively, for the fiscal year ending December 2024.
The stock has gained 1.4% intraday to close the last trading session at $8.58.
GPRK’s POWR Ratings reflect its promising prospects. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value and Quality. It is ranked #10 in the Foreign Oil & Gas industry.
Beyond what we’ve stated above, we have also rated the stock for Growth, Momentum, Stability, and Sentiment. Get all ratings of GPRK here.
Martin Midstream Partners L.P. (MMLP)
MMLP provides terminalling, processing, storage, and packaging services for petroleum products and by-products in the United States. The company operates in four segments: Terminalling and Storage; Transportation; Sulfur Services; and Natural Gas Liquids.
During the first nine months of 2023, MMLP, utilizing free cash flow and a significant reduction in working capital due to the exit from the butane optimization business, reduced total debt by $53.6 million. As a result, adjusted leverage was decreased to 3.95 times at September 30, 2023, compared to 4.53 times at December 31, 2022.
In the fiscal third quarter that ended September 30, 2023, MMLP’s total revenues stood at $176.70 million. Its operating income came to $14.70 million, compared to an operating loss of $12.24 million in the year-ago quarter. Its adjusted EBITDA increased 39.1% year-over-year to $26.17 million.
For the nine months that ended September 30, 2023, MMLP’s net cash provided by operating activities stood at $106.07 million, compared to net cash used in operating activities of $16.76 million in the prior year period. Moreover, its cash at the end of the period came at $54 million, up 20% year-over-year.
The consensus revenue and EPS estimates for the fiscal year ending December 2024 stood at $716.56 million and $0.08, respectively. Analysts expect MMLP's revenue and EPS for the fiscal first quarter ending March 2024 to come at $178.64 million and $0.03, respectively.
The stock has declined 1.3% intraday to close the last trading session at $2.20.
MMLP’s robust outlook is reflected in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
MMLP has a B grade for Value, Momentum, Sentiment, and Quality. Within the MLPs – Oil & Gas industry, it is ranked #5.
To view MMLP's additional ratings for Growth and Stability, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
PBR shares rose $0.14 (+0.81%) in premarket trading Friday. Year-to-date, PBR has gained 7.95%, versus a 4.84% 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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