Supply cuts and rising demand with the reopening of economic activities have recently driven crude oil prices to six-year highs. And oil prices are expected to continue moving higher as supply cuts remain in place because OPEC+ failed to reach a production agreement.
OPEC+’s proposal to increase oil production for August has been postponed because Saudi Arabia and the UAE remain at loggerheads over the oil output. In light of these developments, former U.S. Energy Secretary Dan Brouillette expects oil to hit $100 a barrel soon.
This, coupled with declining inventories, should help mid-cap oil companies Apache Corporation (APA), ARC Resources Ltd. (AETUF), and PDC Energy, Inc. (PDCE) generate higher revenues and profits in the near term. So, we think it could be wise to bet on these stocks now.
Apache Corporation (APA)
APA in Houston, Tex., explores for and produces oil and gas. The company operates through its subsidiaries Apache Corporation and APA Corporation Suriname. It has a $7.57 billion market capitalization.
On May 4, APA announced an agreement with Egypt’s Ministry of Petroleum and Mineral Resources and the Egyptian General Petroleum Corporation to modernize the country’s petroleum sector. The agreement demonstrates APA’s immense global market reach.
APA’s total revenues increased 39.2% year-over-year to $1.87 billion in the fiscal first quarter, ended March 31. Its net income attributable to its common stock improved 108.7% year-over-year to $388 million. The company’s EPS increased 108.6% year-over-year to $1.02.
Analysts expect APA’s revenues to increase 64.6% year-over-year to $7.09 billion in the current year. A $2.76 consensus EPS estimate for the current ongoing year indicates a 355.6% rise from the prior year. APA has an impressive earnings surprise history also; it beat the consensus EPS estimates in each of trailing four quarters. Shares of APA have gained 57% over the past year, and 41.3% year-to-date.
It is no surprise that APA has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
The stock has a grade A for Momentum and Quality, and a B grade for Growth. Among the 94 stocks in the Energy - Oil & Gas industry, APA is ranked #7. To see additional APA ratings for Value, Sentiment, and Stability, click here.
ARC Resources Ltd. (AETUF)
Based in Canada, AETUF explores, develops, and produces crude oil, natural gas, and natural gas liquids. The company is focused in the Montney resource play in Alberta and northeast British Columbia and the Pembina Cardium in Alberta. AETUF has a $5.83 billion market capitalization.
In April, AETUF announced a strategic Montney combination with Seven Generations Energy Ltd. Following this combination, ARC is the largest condensate producer, third-largest natural gas producer, and sixth-largest upstream energy company in Canada.
AETUF’s revenue increased 93.1% year-over-year to CAD518.60 million ($413.37 million) in its fiscal first quarter, ended March 31. Its net income stood at CAD178 million ($141.88 million), up 131.9% from the same period last year. The company’s EPS increased 131.6% year-over-year to CAD$0.50. Its cash and cash equivalents balance rose 17,648.3% from the prior year quarter to CAD1.06 billion ($0.84 billion) over this period.
A $3.14 billion consensus revenue estimate for the next year indicates a 11% improvement from the current year. Analysts expect the company’s EPS to come in at $0.90 in the next year, indicating a 3.2% rise year-over-year. Also, the company’s EPS is expected to increase 4,816% year-over-year to $0.27 in the current quarter, ending September 2021. AETUF has gained 127.9% over the past year, and 70.3% year-to-date.
AETUF has an overall A rating, which equates to Strong Buy in our proprietary rating system. AETUF has an A grade for Momentum and Sentiment, and a B grade for Growth, Value, and Quality. It is ranked #1 in the same industry.
Beyond what we’ve stated above, we have also rated AETUF for Stability. Click here to view all AETUF ratings and other details.
PDC Energy, Inc. (PDCE)
With a $4.36 billion market capitalization ,Denver, Colo.-based PDCE is an independent exploration and production company that acquires, explores for , develops, and produces crude oil, natural gas, and natural gas liquids. The company operates through two segments: Oil and Gas Exploration and Production, and Gas Marketing.
In February, PDCE announced plans to invest $500 million - $600 million in 2021. The company aims to generate more than $400 million in free cash flow in the current year.
PDCE’s income from operations increased 102.2% year-over-year to $10.06 million in its fiscal first quarter, ended March 31. The company’s net income improved 98.1% year-over-year, while its EPS improved 98.2% from the same period last year.
The Street expects PDCE’s revenues to rise 102.8% year-over-year to $505.40 million in the current quarter, ending September 2021. A $1.44 consensus EPS estimate for the current quarter indicates a 38.5% improvement year-over-year. Furthermore, PDCE surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of PDCE have gained 228.4% over the past year, and 112.4% year-to-date.
It’s no surprise that PDCE has an overall B rating, which equates to Buy in our POWR Ratings system. PDCE has an A grade for Momentum, and a B for Growth, Sentiment, and Quality. It is ranked #9 in the Energy - Oil & Gas industry. To see additional POWR Ratings for Value and Stability, click here.
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APA shares were trading at $20.55 per share on Friday afternoon, up $0.52 (+2.60%). Year-to-date, APA has gained 45.24%, versus a 17.27% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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