Oil prices rose on Tuesday on concerns over tight European supply after Russia cut gas supply through a major pipeline. Additionally, Hiroyuki Kikukawa, Managing Director of Research at Nissan Securities, said, “Rising gas prices, triggered by gas compression in Russia, could drive a further shift to crude oil and support oil prices.” .
Global oil consumption has exceeded its supply since mid-2020, which, combined with the Russian invasion, has heightened concerns about a global supply crunch, which put upward pressure on oil prices. The price of Brent should average $104/b this year.
Moreover, the energy sector seems to be benefiting from favorable investor sentiment, as evidenced by the results of the Energy Select Sector SPDR fund (XLE) Year-to-date gains of 31.7%, well outpacing the SPDR S&P 500 ETF Trust (TO SPY) down 17.7% over the same period.
Against this backdrop, the fundamentally strong energy stocks of TotalEnergies SE (TTE), Diamondback Energy, Inc. (CROC), and Conoco Phillips (COP) could boost his portfolio.
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. The company is headquartered in Courbevoie, France.
TTE and its partner Nigerian National Petroleum Corporation (NNPC), recently announced the start of production from the Ikike field in Nigeria. The Ikike project is expected to produce 50,000 barrels of oil equivalent per day at its peak by the end of 2022.
Earlier in the same month, TTE announced the signing of a contract with Sonatrach for an extension of its 25-year production sharing contract for onshore blocks 404a and 208 in the Berkine basin in eastern Algeria. “This project is part of the Company’s strategy to develop low-cost oil while contributing to carbon reduction programs in order to minimize our carbon footprint,” said Laurent Vivier, Senior Vice President Middle East and North Africa, Exploration & Production at TTE.
TTE’s adjusted net income was $8.98 billion for the first quarter of 2022, representing 198.9% year-over-year growth. Its adjusted EBITDA increased 113.3% from the prior year quarter to $17.42 billion, while its cash flow from operations increased 36.1% from the same period last year to reach $7.62 billion. Adjusted EPS increased 209.1% from the prior year period to $3.40.
Analysts expect TTE’s revenue for the quarter ended June 2022 to be $60.57 billion, indicating 45.5% year-over-year growth. The company’s EPS for the same quarter is expected to increase 179.9% from the prior year quarter to $3.56. Additionally, TTE has exceeded consensus EPS estimates in each of the past four quarters, which is impressive.
TTE has gained 14.7% over the past year and 4.3% over the past three months to close its last trading session at $49.66.
TTE POWR Rankings reflect this promising prospect. The company has an overall rating of A, which translates to Strong Buy in our proprietary rating system. POWR ratings rate stocks on 118 different factors, each with its own weighting.
TTE has an A rating for Momentum and a B for Growth and Sentiment. It is ranked #4 out of 97 stocks in the B rating Energy – Oil & Gas industry.
Beyond what we’ve stated above, we’ve also given TTE ratings for value, stability, and quality. Get all TTE ratings here.
Diamondback Energy, Inc. (CROC)
FANG is an independent oil and gas company that acquires, develops and explores unconventional and onshore oil and natural gas reserves in the West Texas Permian Basin.
In June, FANG announced an enhancement to its capital repayment program. Starting in the third quarter of this year, the company intends to increase its capital repayment commitment to at least 75% of free cash flow.
Additionally, it intends to increase its base dividend to $3.00 per common share per year, beginning in the second quarter of 2022. This reflects on the company’s earning capacity for shareholders.
In May, FANG and Rattler Midstream LP (RTLR) announced that they have entered into a definitive agreement for FANG to acquire all publicly held common shares representing limited partner interests in RTLR that are not already held by the company and its subsidiaries. This should benefit businesses of the combined company’s size.
FANG’s total revenue grew 103.4% year-over-year to $2.41 billion in the first quarter that ended March 31. operating income grew 190.7% from the prior year’s value to $1.66 billion, while its net profit improved 260.1% year-over-year to $803 million over the period. The company’s earnings per common share rose 227.8% from its value a year ago at $4.36.
The consensus EPS estimate of $6.68 for the second fiscal quarter (ended June 2022) indicates a 178.2% year-over-year improvement. The consensus revenue estimate of $2.43 billion for the same quarter reflects a 44.7% increase over the same period last year.
The company has an impressive track record of earnings surprises, as it beat consensus EPS estimates in each of the past four quarters.
The stock has gained 47.4% over the past year and 9.7% since the start of the year to close its last trading session at $118.28.
It’s no surprise that FANG has an overall rating of B, which equates to Buy in our proprietary rating system. FANG has an A rating for Momentum and a B rating for Quality. It is ranked #25 in the same industry.
Click here to see additional POWR ratings for FANG (Growth, Value, Stability, and Sentiment).
Conoco Phillips (COP)
COP explores, produces, transports and markets crude oil, bitumen, natural gas, LNG and natural gas liquids worldwide. The Company is primarily engaged in conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands and other production operations.
On July 14, COP announced an investment in a new large-scale LNG facility in Jefferson County, Texas being developed by Sempra (ERS) subsidiary Sempra Infrastructure. This should expand the company’s LNG business.
For the first quarter of 2022, COP’s total revenue and other revenue increased 82.7% year-on-year to $19.29 billion. Adjusted earnings and adjusted earnings per share were $4.29 billion and $3.27, up 375.5% and 373.9% from the prior year period.
The street’s EPS estimate for the second fiscal quarter (ending June 2022) of $3.85 reflects a 203.6% year-over-year increase. Similarly, Street’s revenue estimate for the same quarter of $19.71 billion indicates a 93% improvement over the prior year period. Additionally, COP has exceeded consensus EPS estimates in each of the past four quarters, which is impressive.
Over the past year, COP stock has gained 60.2% to close its last trading session at $91.09. It has gained 26.2% since the start of the year.
This promising outlook is reflected in COP’s POWR ratings. The stock has an overall rating of B, which is equivalent to Buy in our proprietary rating system. COP has an A rating for Momentum and a B for Sentiment and Quality. It is ranked #20 in the same industry.
Beyond what we’ve stated above, we’ve also assigned a COP rating for growth, value, and stability. Get all COP ratings here.
TTE shares were trading at $50.83 per share on Wednesday afternoon, up $1.17 (+2.36%). Year-to-date, the TTE has gained 4.81%, compared to a -15.25% rise in the benchmark S&P 500 over the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. After…