Oil and gas prices have experienced rapid hikes in recent times, escalated by economic and geopolitical concerns worldwide, further backed by rapidly evolving demand and consumption.
Against this backdrop, it could be wise to invest in fundamentally strong energy stocks Baker Hughes Company (BKR), Energy Transfer LP (ET), and Cenovus Energy Inc. (CVE) with significant potential.
Oil prices grew about 1% recently, pumped by the strong summer driving demand and escalating tensions in the Middle East. Drone attacks on Russian refineries led to disruptions in supply coupled with easing the U.S. dollar, further strengthening the crude price.
Brent futures for August delivery settled at $86.01 a barrel, rising 77 cents, or 0.9%. U.S. crude came at $81.63 a barrel, gaining 90 cents, or 1.1%.
The Brent crude oil spot price averaged $82 per barrel (b) in May. The recent OPEC+ cuts extension through the third quarter of fiscal 2024 led to a reduced forecast for OPEC+ oil production for the current year. The expected lower OPEC+ production will likely cause Brent prices to rise to an average of $85/b during the second half of 2024.
Amid this, OPEC remains optimistic regarding oil demand in the second half of the year. The world oil consumption is set to increase 2.3 million barrels a day year-on-year in the remaining half of the year, about 150,000 a day more than during the first.
Besides, Global demand for electricity is projected to grow rapidly by an average of 3.4% annually through 2026. The worldwide energy market is expected to grow at a CAGR of 4.8% until 2028.
Given the industry’s robust outlook, let’s look at the fundamentals of top Energy – Oil & Gas stocks in detail, beginning with number 3.
Stock #3: Baker Hughes Company (BKR)
BKR offers a portfolio of technologies and services to energy and industrial value chains globally. It operates in Oilfield Services & Equipment; and Industrial & Energy Technology segments. The company designs and manufactures products and provides related services, including exploration, development, production, and decommissioning.
On June 10, BKR received a significant order from Petrobras for workover and plug and abandonment services in pre-salt and post-salt fields offshore Brazil. Under the multi-year project, BKR will optimize performance for Petrobras and will deploy wireline, coiled tubing, cementing, tubular running, wellbore intervention, fishing, and geosciences services.
On April 23, BKR received an order by Worley, for and on behalf of Aramco, to supply gas technology equipment for the third phase of Saudi Arabia’s Master Gas System project. BKR will supply 17 pipeline centrifugal compressors driven by state-of-the-art aeroderivative gas turbines.
On the same day, BKR’s Board of Directors declared a quarterly cash dividend of $0.21 per share of Class A common stock paid on May 16, 2024, to holders of record on May 6, 2024. The dividend reflects an 11% increase, or $0.02, compared to the same quarter last year reflecting its robust capital structure and ability to provide stable growth in the long run.
BKR pays an annual dividend of $0.84, which translates to a yield of 2.39% at the current share price. Its four-year average dividend yield is 3.40%. Moreover, the company’s dividend payouts have increased at a CAGR of 11.9% over the past three years.
BKR’s revenue increased 12.2% year-over-year to $6.42 billion during the first quarter that ended March 31, 2024. Its adjusted operating income grew 28.9% from the year-ago value to $660 million. Adjusted net income attributable to BKR and EPS came in at $429 million and $0.43 for the quarter, up 48.4% and 53.6% from the prior year’s quarter, respectively.
Furthermore, the company’s adjusted EBITDA grew 20.6% from the year-ago value to $943 million.
Street expects BKR’s EPS for the second quarter (ended June 2024) to increase 25.6% year-over-year to $0.49. Its revenue for the same quarter is expected to grow 7.7% year-over-year to $6.80 billion. Also, the company has surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
BKR’s stock has gained 8.7% over the past month and 13% over the past year to close the last trading session at $35.17.
BKR’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.
BKR has an A grade for Momentum and a B for Growth. It is ranked #17 out of 81 stocks in the Energy – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have BKR ratings for Value, Sentiment, Quality, and Stability. Get all BKR ratings here.
Stock #2: Energy Transfer LP (ET)
ET provides energy-related services. It owns and operates natural gas transportation pipelines and natural gas storage facilities in Texas and Oklahoma and approximately 20,090 miles of interstate natural gas pipeline. It also sells natural gas to electric utilities, independent power plants, local distribution and other marketing companies, and industrial end-users.
On May 28, ET and WTG Midstream, LLC entered a definitive agreement under which ET will acquire WTG in a transaction valued at approximately $3.25 billion and includes eight gas processing plants (~1.3 Bcf/d) and two more under construction (~0.4 Bcf/d). The strategic acquisition will expand ET’s natural gas pipeline and processing network in the Permian Basin.
On April 24, ET increased its quarterly cash distribution to $0.3175 per common unit, $1.27 on an annualized basis, for the first quarter ended March 31, 2024. The cash distribution per common unit was paid on May 20, 2024, to unitholders of record as of the close of business on May 13, 2024, and indicates an increase of 3.3% compared to the first quarter of 2023.
ET pays an annual dividend of $1.27, which translates to a yield of 7.83% at the current share price. Its four-year average dividend yield is 9.41%. Moreover, the company’s dividend payouts have increased at a CAGR of 18.1% over the past three years.
In the first quarter that ended March 31, 2024, ET’s revenues increased 13.9% year-over-year to $21.63 billion. Its operating income grew 15.4% from the year-ago value to $2.38 billion. Its net income was $1.69 billion, up 16.9% from the previous year’s quarter. In addition, 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 39.9% year-over-year to $0.35. The company’s revenue for the same quarter is expected to grow 16.8% year-over-year to $21.39 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 11.8% and 36.1% year-over-year to $87.88 billion and $1.48.
ET’s stock has surged 17.8% over the past six months and 27.3% over the past year to close the last trading session at $16.22.
ET’s bright prospects are reflected in its POWR Ratings. It has an overall rating of B which translates to a Buy in our proprietary rating system.
The stock has an A grade for Momentum. The stock also has a B grade for Growth, Value, and Stability. ET is ranked #8 among 81 stocks in the Energy – Oil & Gas industry.
Click here to access ET’s ratings for Quality, and Sentiment.
Stock #1: Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products internationally. It operates through four segments: Oil Sands; Conventional; Offshore, Canadian Refining; and U.S. Refining.
On May 1, CVE’s Board of Directors declared a quarterly base dividend of $0.18 per common share, payable on June 28, 2024, to shareholders of record as of June 14, 2024. The Board also declared a variable dividend of $0.13 per common share to shareholders of record on May 17, 2024, paid on May 31, 2024.
Further, the Board declared a quarterly dividend on each of the cumulative redeemable first preferred shares – Series 1 ($0.16), Series 2 ($0.42), Series 3 ($0.29), Series 5 ($0.29) and Series 7 ($0.24) – payable on July 2, 2024, to shareholders of record as of June 14, 2024.
CVE pays an annual dividend of $0.44 per share, which translates to a yield of 2.25% on the current share price. Its four-year average dividend yield is 1.45%. The company’s dividend payouts have grown at a CAGR of 149.8% over the past three years.
CVE’s revenues increased 9.3% year-over-year to C$13.40 billion ($9.79 billion) during the first quarter that ended March 31, 2024. Its earnings before income tax grew 162.1% year-over-year to C$1.55 billion ($1.13 billion). Its net earnings came in at C$1.18 billion ($862.58 million) and C$0.62 per common share, up 84.9% and 93.7% from the prior year’s quarter, respectively.
Furthermore, as of March 31, 2024, the company’s total current assets stood at C$10.84 billion ($7.92 billion) versus C$9.71 billion ($7.10 billion), respectively.
Analysts expect CVE’s EPS for the second quarter (ended June 2024) to increase 120.1% year-over-year to $0.63 and its revenue for the same quarter is expected to grow 14.5% year-over-year to $11.13 billion. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 10.7% and 29.7% year-over-year to $42.89 billion and $2.07, respectively.
Shares of CVE have surged 19.3% over the past six months and 19.2% over the past year to close the last trading session at $19.69.
CVE’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
The stock has an A grade for Quality and a B grade for Momentum and Growth. Within the same industry, CVE is ranked #5 among 81 stocks.
Click here to access additional ratings of CVE for Stability, Value, and Sentiment.
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ET shares were trading at $16.27 per share on Monday afternoon, up $0.05 (+0.31%). Year-to-date, ET has gained 22.95%, versus a 15.20% 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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