With oil prices surging 34% so far this year, it’s a good time for big oil companies.
Earnings reports from most of the majors are due in the next few weeks. So Barron’s created a list of the companies that have seen the biggest increases in earnings estimates from analysts this year.
Marathon Petroleum (MPC). As a big oil refiner, “it has benefited from the increase in demand for petroleum products like diesel fuel,” writes Barron’s' Avi Salzman.
Occidental Petroleum (OXY) It reaps the rewards of chemical and pipeline businesses in addition to oil, he said.
APA (APA) It has overseas exposure in Europe and off the coast of South America, helpful additions to its U.S. operations, Salzman said.
Marathon Oil (MRO) It concentrates on four major U.S. oil and gas projects.
Hess (HES) It, too, is active in the U.S. and overseas, including offshore Guyana and in Malaysia and Libya.
As for Occidental, Morningstar analyst Dave Meats sees some positive signs. “[It] has cut the chaff from its upstream portfolio in the past few years, shedding noncore assets to focus on core holdings in the U.S. and Middle East,” he wrote in an April 11 commentary.
“The portfolio was further transformed by the 2019 acquisition of Anadarko Petroleum. This transaction bolstered the firm's unconventional footprint in the Permian to 1.6 million acres, and augmented its U.S. midstream portfolio with a stake in Western Midstream Partners (WES).”
Marathon Petroleum & Hess
Turning to Marathon Petroleum, Morningstar analyst Allen Good on April 21 raised his fair-value estimate to $87. The stock recently traded at $86.68.
“U.S. refiners have been a beneficiary of the fallout from the Russian invasion of Ukraine, as restrictions on Russian crude and product exports have resulted in tight global product inventories, particularly distillate,” he wrote in an April 21 commentary.
“Also, higher global natural gas prices, a key input to the refining process, have improved U.S. refiners’ relative competitiveness, even as domestic natural gas prices have soared to their highest level in almost 14 years.”
Looking at Hess, Morningstar analyst Dave Meats wrote in a January commentary that its "track record for efficiently allocating capital and generating value has been steadily improving for several years,”
In recent years, “management began streamlining the company, selling midstream and downstream assets and rationalizing its upstream portfolio,” he said.
“The current portfolio is substantially more competitive, but the development cost requirements are heavily front-loaded.”
