The oil and gas industry is rapidly evolving, with continuous OPEC+ production cuts, renewed oil demand and supply forecasts, and oil inventory shifts amid geopolitical concerns in the Middle East. Further, robust OPEC and IEA predictions of robust oil demand in the second half of 2024 depict a positive outlook.
Against this backdrop, it could be wise to invest in fundamentally strong energy stocks Marathon Oil Corporation (MRO), Cenovus Energy Inc. (CVE), and Energy Transfer LP (ET) poised for high upside.
Global oil supply is trending on the higher end with second-quarter production up 910 kb/d from the first quarter, led by the US. Also, oil output is projected to rise by another 770 kb/d during the third quarter with non-OPEC+ providing 600 kb/d of the gains. Further, for the full year, global oil supply growth is likely to average 770 kb/d, boosting the oil supply to a record 103 mb/d.
Further, OPEC’s forecast of strong growth in global oil demand in 2024 and next year projected a positive insight. The forecast is driven by resilient economic growth and rising air travel supporting fuel consumption in the summer months. The OPEC reported world oil demand to rise by 2.25 million and by 1.85 million barrels per day in 2024 and 2025.
Brent crude oil prices have been forecasted to average $89 per barrel (b) in the second half of 2024, higher from the $84/b in the first half.
The global oil and gas market is expected to grow to $9.35 trillion by 2028, exhibiting growth at a CAGR of 5.2%.
Considering the encouraging market trends, let’s delve into the fundamentals of the top three Energy – Oil & Gas stocks, beginning with the third choice.
Stock #3: Marathon Oil Corporation (MRO)
MRO is an independent exploration and production company engaged in international exploration, production, and marketing of crude oil and condensate, natural gas liquids, and natural gas. It also produces and markets products manufactured from natural gas like liquefied natural gas and methanol.
On July 31, MRO’s Board of Directors declared a dividend of $0.11 per share on the company’s common stock. The dividend is payable on September 10, 2024, to stockholders of record on August 21, 2024.
MRO pays an annual dividend of $0.44, which translates to a yield of 1.65% at the current share price. Its four-year average dividend yield is 1.29%. Moreover, the company’s dividend payouts have increased at a CAGR of 62.6% over the past three years.
On May 29, MRO and ConocoPhillips (COP) entered into a definitive agreement under which ConocoPhillips will acquire MRO in an all-stock transaction with an enterprise value of $22.5 billion, including $5.4 billion of net debt. The acquisition is expected to offer a unique combination of added scale, resilience and long-term durability to MRO.
For the first quarter that ended March 31, 2024, MRO reported total revenues and other income of $1.55 billion and its income from operations was $448 million. The company’s adjusted net income came in at $317 million and $0.55 per share for the quarter, respectively. Furthermore, MRO’s adjusted free cash flow was at $239 million for the period.
As per the company’s 2024 outlook, MRO’s expected free cash flow is $2.20 billion for the year.
Analysts expect MRO’s revenue and EPS for the second quarter (ended June 2024) to grow 13.6% and 45.1% year-over-year to $1.72 billion and $0.70, respectively. Also, the company topped the consensus EPS estimates in each of the four trailing quarters.
Shares of MRO have surged 18.7% over the past six months and 3.7% over the past year to close the last trading session at $26.65. Moreover, its 12-month price target of $33.07 reflects a 24.1% potential upside.
MRO’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
MRO has a B grade for Quality. It is ranked #21 out of 80 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have MRO ratings for Value, Sentiment, Growth, Momentum, and Stability. Get all MRO ratings here.
Stock #2: Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products in Canada and internationally. The company operates in segments like Oil Sands; Conventional; Offshore; Canadian Refining; and U.S. Refining.
On August 1, CVE’s Board of Directors declared a quarterly base dividend of $0.18 per common share, payable on September 27, 2024 to shareholders of record as of September 13, 2024.
Also, the Board declared a quarterly dividend on each of the cumulative redeemable first preferred shares. Dividend is as follows: $0.16 on Series 1, $0.41 on Series 2, $0.29 on Series 3, $0.29 on Series 5, and $0.25 on Series 7, to be paid on October 1, 2024 to shareholders of record as of September 13, 2024.
CVE pays an annual dividend of $0.62, which translates to a yield of 3.45% at the current share price. Its four-year average dividend yield is 1.44%. Moreover, the company’s dividend payouts have increased at a CAGR of 149.8% over the past three years.
During the second quarter, CVE’s production in the Conventional segment was 123,100 BOE/d, indicating an increase from 120,700 BOE/d from the prior quarter. Also, Offshore segment’s production grew to 66,200 BOE/d from the production of 64,900 BOE/d in the first quarter.
CVE’s revenues increased 21.7% year-over-year to C$14.88 billion ($10.73 billion) during the second quarter that ended June 30, 2024. Its net earnings came in at C$1.00 billion ($720.76 million) and C$0.53 per share, up 15.5% and 20.4% from the prior year’s quarter, respectively.
Furthermore, its adjusted funds flow rose 24.3% and 28.6% year-over-year to C$2.36 billion ($1.70 billion) and C$1.26 per share, respectively. The company’s total assets stood at C$56 billion ($40.36 billion) as of June 30, 2024, compared to C$53.91 billion ($38.86 billion) as of December 31, 2023.
According to the company’s revised 2024 corporate guidance, CVE expects total upstream production of 785,000 BOE/d to 810,000 BOE/d, an increase of 7,500 BOE/d at the midpoint. And total downstream throughput is expected to be 640,000 bbls/d to 670,000 bbls/d, up by 5,000 bbls/d at the midpoint.
Street expects CVE’s revenue for the fourth quarter (ending December 2024) to increase 6.8% year-over-year to $10.42 billion, while its EPS is expected to grow 112.4% year-over-year to $0.59, respectively. Furthermore, the company surpassed the consensus revenue estimates in three of the trailing four quarters.
CVE’s stock has surged 13.5% over the past six months to close the last trading session at $17.88. Wall Street analysts expect the stock to reach $24.71 in the upcoming 12 months, indicating a potential upside of 38.2%.
CVE’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B which translates to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B grade for Growth. CVE is ranked #4 among 80 stocks in the Energy – Oil & Gas industry.
Click here to access CVE’s ratings for Momentum, Value, Stability and Sentiment.
Stock #1: Energy Transfer LP (ET)
ET is a provider of energy-related services. It owns and operates natural gas transportation pipeline, and natural gas storage facilities in Texas and Oklahoma, and nearly 20,090 miles of interstate natural gas pipeline. The company also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
On July 25, ET announced an increase in the quarterly cash distribution to $0.32 per common unit for the second quarter which ended June 30, 2024. The cash distribution per common unit is to be paid on August 19, 2024 to unitholders of record as of the close of business on August 9, 2024, and reflects a rise of 3.2% year-over-year.
ET pays an annual distribution of $1.28, which translates to a yield of 8.03% at the current share price. Its four-year average dividend yield is 9.15%. Moreover, the company’s dividend payouts have increased at a CAGR of 18.1% over the past three years.
On July 16, ET and Sunoco LP (SUN) entered a joint venture to combine their crude oil and produced water gathering assets in the Permian Basin. ET will hold 67.5% interest in the joint venture with Sunoco holding a 32.5% interest.
Also, on the same day, ET completed acquisition of WTG Midstream Holdings LLC. Total consideration for the transaction was $2,275 million in cash and about 50.8 million newly issued ET common units. The acquisition expanded Permian Basin pipeline and processing network providing further access to growing supplies of natural gas and NGLs.
During the first quarter that ended March 31, 2024, ET’s revenues rose 13.9% year-over-year to $21.63 billion. Its operating income grew 15.4% from the year-ago value to $2.38 billion. The company’s net income came in at $1.69 billion, up 16.9% from the prior year’s quarter. And the company’s adjusted EBITDA increased 13% year-over-year to $3.88 billion.
Street expects ET’s EPS for the second quarter (ended June 2024) to increase 42.4% year-over-year to $0.36 and its revenue for the same quarter is expected to grow 17.4% year-over-year to $21.50 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 12% and 34.7% year-over-year to $88.01 billion and $1.47, respectively.
ET’s stock has gained 11.3% over the past six months and 21.4% over the past year to close the last trading session at $15.95. Moreover, Wall Street analysts expect the stock to reach $19.50 in the upcoming 12 months, indicating a potential upside of 22.3%.
ET’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
The stock has an A grade for Momentum. It also has a B grade for Stability, Value, and Growth. Within the same industry, ET is ranked #3 in the list of 80 stocks.
Click here to access additional ratings of ET for Sentiment, and Quality.
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.
ET shares were trading at $15.48 per share on Monday afternoon, down $0.47 (-2.95%). Year-to-date, ET has gained 16.98%, versus a 9.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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