The intensified supply cuts from OPEC+ and the growing worldwide demand for oil may result in a surge in oil prices. In light of this, it could be an opportune time to own the shares of three fundamentally strong energy companies, Equinor ASA (EQNR), Par Pacific Holdings, Inc. (PARR), and Newpark Resources, Inc. (NR).
Despite the increasing momentum toward renewable energy, global oil consumption is on the rise. The International Energy Agency (IEA) has increased its projection for oil demand growth in 2023 to 2.4 million barrels per day (bpd). Also, it has revised its growth forecast for 2024 to 930,000 bpd, an increase from the earlier projection of 880,000 bpd.
On the other hand, the supply continues to face limitations. OPEC has been enforcing supply cuts since late 2022 to stabilize the oil market and boost oil prices. Several OPEC+ countries have jointly committed to voluntary oil production cuts amounting to 2.2 million barrels per day in the first quarter of 2024.
In light of the uncertainties stemming from the supply constraints in the upcoming months, the Energy Information Administration (EIA) anticipates Brent crude oil spot price to climb from an average of $78 per barrel in December to an average of $84 per barrel in the first half of 2024.
Moreover, commodity analysts continue to express an optimistic outlook for 2024. Leading U.S. banks predict a median Brent price of $85 for 2024, pointing to the anticipated demand growth and the potential for supply disruptions. Heightened demand, particularly from Asia, has the potential to drive prices upward.
Given the optimistic outlook for the energy sector in 2024, buoyed by soaring demand and supply constraints, investors could consider buying the shares of EQNR, PARR, and NR for potential gains. With that being said, let’s dive deeper into the fundamentals of these energy stocks in detail:
Equinor ASA (EQNR)
Headquartered in Stavanger, Norway, EQNR engages in the exploration, production, transportation, refining, and marketing of petroleum and other forms of energy. It operates through Exploration & Production Norway; Exploration & Production International; Exploration & Production USA; Marketing, Midstream & Processing; Renewables; and other segments.
On October 30, EQNR and energy company RWE entered into a new supply contract covering a range of 10 to 15 terawatt hours (approximately 1-1.5 billion cubic meters) of natural gas annually, extending until 2028. This fresh bilateral agreement further strengthens the enduring partnership between RWE and EQNR.
On October 27, EQNR declared an ordinary dividend of $0.30 and an extraordinary dividend of $0.60, payable to its shareholders on February 27, 2024.
The company’s annual dividend of $1.20 translates to a 3.78% yield on the prevailing prices, while its four-year average dividend yield is 5.73%. Its dividend payouts have grown at a CAGR of 15.7% over the past three years.
EQNR’s trailing-12-month asset turnover ratio of 0.77x is 39.3% higher than the industry average of 0.55x. Likewise, its trailing-12-month cash per share of $5.03 is 442.7% higher than the industry average of $0.93. Furthermore, the stock’s trailing-12-month levered FCF margin of 24.09% is 311.1% higher than the industry average of 5.86%.
For the third quarter, which ended on September 30, 2023, EQNR’s total revenues and other income amounted to $25.92 billion, while its net operating income and net income came in at $7.45 billion and $2.50 billion, respectively. In addition, during the same period, its total comprehensive income stood at $2.21 billion.
Analysts expect EQNR’s revenue and EPS for the fiscal fourth quarter (ending December 2023) to be $29.53 billion and $1.01, respectively. Moreover, the company’s EPS is projected to improve by 5.8% per annum over the next five years.
Over the past nine months, EQNR’s shares have surged 24.3% to close the last trading session at $32.26.
EQNR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, translating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality. In the 43-stock B-rated Foreign Oil & Gas industry, it is ranked #18. Click here to see EQNR ratings for Growth, Value, Momentum, Stability, and Sentiment.
Par Pacific Holdings, Inc. (PARR)
PARR owns and operates energy and infrastructure businesses. The company operates through three segments: Refining; Retail; and Logistics.
On December 8, PARR was chosen as a finalist by Hawaiian Electric for its 30-megawatt renewable cogeneration development project. The project, located at PARR’s Pacific's Kapolei refinery, utilizes existing infrastructure and supports Hawaii's renewable energy goals.
Expected to commence operations by 2028, the facility will also serve as a local outlet for renewable liquid fuels produced from a prior project. Commenting on this, Will Monteleone, President of PARR, said, “The cogeneration project aligns with our renewables strategy of investing in our people and assets to meet the evolving energy needs of our communities.”
PARR’s trailing-12-month asset turnover ratio of 2.25x is 308.5% higher than the industry average of 0.55x. Likewise, its trailing-12-month cash per share of $5.74 is 518.8% higher than the industry average of $0.93. Furthermore, the stock’s trailing-12-month Return On Common Equity (ROCE) of 64.77% is 223.9% higher than the industry average of 19.99%.
In the fiscal third quarter that ended September 30, 2023, PARR’s revenues increased 25.4% year-over-year to $2.58 billion, while its operating income stood at $196.87 million.
During the same period, the company’s adjusted net income and adjusted net income per share rose 12.5% and 9.4% from the prior-year quarter to $193.50 million and $3.15, respectively. Also, its adjusted EBITDA came in at $255.75 million, up 19.5% from the year-ago value.
Street expects PARR’s revenue for the fiscal fourth quarter (ending December 2023) to increase 17.8% year-over-year to $2.13 billion. Meanwhile, its EPS for the same quarter is expected to be $1.27. Additionally, the company surpassed its consensus revenue estimates in each of the trailing four quarters, which is promising.
The stock has soared 72.5% over the past year to close the last trading session at $36.03.
PARR’s strong fundamentals 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 for Value and Quality. Within the 84 stocks in the Energy - Oil & Gas industry, it is ranked #10. Click here to see the other ratings of PARR for Growth, Momentum, Stability, and Sentiment.
Newpark Resources, Inc. (NR)
NR provides products, rentals, and services primarily to the oil and natural gas exploration and production (E&P) industry. It operates through two segments, Fluids Systems and Industrial Solutions.
NR’s trailing-12-month asset turnover ratio of 1.13x is 105.4% higher than the industry average of 0.55x. Likewise, its trailing-12-month levered FCF margin of 13.86% is 136.5% higher than the industry average of 5.86%.
For the fiscal third quarter that ended September 30, 2023, NR’s revenues stood at $198.50 million, while its operating income came at $13.25 million versus an operating loss of $21.31 million in the prior-year quarter. Its adjusted EBITDA rose 13.5% from the year-ago value to $22.26 million.
In addition, the company’s adjusted net income and adjusted net income per share came in at $8.35 million and $0.09, representing increases of 59.5% and 50% year-over-year, respectively.
Analysts predict NR’s EPS for the fourth quarter (ending December 2023) to increase 14.3% year-over-year to $0.08, while its revenue for the ongoing quarter is expected to be $171.14 million. The company topped the consensus EPS estimates in three of the trailing four quarters, which is impressive.
NR’s shares have gained 70.1% year-to-date and 84.8% over the past year to close the last trading session at $7.06.
It’s no surprise that NR has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B for Momentum and Sentiment. Out of 49 stocks in the Energy - Services industry, it is ranked #10.
In addition to the POWR Ratings we’ve stated above, we also have NR’s ratings for Growth, Value, Stability, and Quality. Get all NR ratings here.
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EQNR shares were trading at $32.30 per share on Wednesday afternoon, up $0.04 (+0.12%). Year-to-date, EQNR has declined -0.45%, versus a 26.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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