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3 Energy Giants Experts Believe Still Have 15% or More Upside

Potential supply cut concerns are boosting the oil prices while demand remains robust. Amid this, Wall Street analysts expect energy giants Shell plc (SHEL), ConocoPhillips (COP), and TotalEnergies (TTE) to soar 15% or more in the near term. Read more…

Oil prices surged earlier this week amid tight supply concerns as OPEC+ is floating the idea of cutting supplies. On top of it, falling U.S crude and product stockpiles also added to the upward pressure on prices.

According to Swiss bank UBS Group AG (UBS), oil prices could climb to $125 on the backs of a tight market supply, declining spare capacity, and low oil inventories. Moreover, UBS said that non-OECD countries, which account for 54% of global demand, are exhibiting strong oil demand.

Given this backdrop, Wall Street analysts see significant upside potential in the energy giants Shell plc (SHEL), TotalEnergies SE (TTE), and ConocoPhillips (COP). Hence, these stocks might be solid additions to one’s watchlist.

Shell plc (SHEL)

SHEL is an energy and petrochemical company that operates in several parts of the world. The company operates through Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments. The company is headquartered in London, United Kingdom.

On August 9, SHEL’s wholly owned subsidiary Shell Overseas Investment B.V announced the completion of its acquisition of Solenergi Power Private Limited, including the Sprng Energy group of companies which is a renewable energy platform based in Pune, India. The solar and wind assets should help SHEL reach its target of becoming a profitable net-zero emissions energy business by 2050.

On July 25, Shell USA, Inc. and Shell Midstream Partners, L.P. (SHLX) announced they had executed a definitive agreement and plan of merger pursuant to which Shell USA is expected to acquire all of the common units representing limited partner interests in SHLX held by the public at $15.85 per Public Common Unit in cash. The Transaction is expected to close in the fourth quarter of 2022.

SHEL’s total revenue and other income increased 66.9% year-over-year to $103.08 billion in the second quarter ended June 30. Its adjusted earnings grew 107.3% from the year-ago value to $11.47 billion, while its adjusted EBITDA improved 69.9% year-over-year to $18.66 billion. The company’s adjusted earnings per common share increased 116.9% from its year-ago value to $1.54.

The consensus EPS estimate of $2.87 for the fiscal quarter ending December 2022 indicates a 72.7% improvement year-over-year. The consensus revenue is expected to be $60.33 billion for the same period. Additionally, SHEL has topped consensus EPS estimates in three of the trailing four quarters, which is impressive.

The stock has gained 37% over the past year and 25.4% year-to-date to close its last trading session at $54.44.

Of the three Wall Street analysts that rated SHEL, two have rated it Buy, while one has rated it Hold. The 12-month median price target of $66.67 indicates a 22.5% potential upside. The price targets range from a low of $60.00 to a high of $75.00.

ConocoPhillips (COP)

COP explores, produces, transports, and markets crude oil, bitumen, natural gas, LNG, and natural gas liquids globally. The company engages in conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands, and other production operations.

In August, COP announced an ordinary quarterly dividend of 46 cents per share, payable to shareholders on September 1, 2022. This reflects upon the company’s cash generation ability.

On July 14, COP announced an investment in a new large-scale LNG facility in Jefferson County, Texas, under development by Sempra (SRE) subsidiary Sempra Infrastructure. This is expected to expand the company’s LNG business.

For the second quarter of 2022, COP’s total revenues and other income increased 115.3% year-over-year to $21.99 billion. Its net cash provided by operating activities grew 86.2% from the prior-year period to $7.91 billion. COP’s adjusted earnings and adjusted earnings per share came in at $5.09 billion and $3.91, up 196.4% and 207.9% from the prior-year period.

Street EPS estimate for the fiscal third quarter (ending September 2022) of $3.82 reflects a rise of 115.9% year-over-year. Likewise, Street revenue estimate for the same quarter of $20.05 billion indicates an improvement of 72.6% from the prior-year period. Additionally, COP has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

Over the past year, COP’s stock has gained 99.5% to close its last trading session at $110.52. It has gained 53.1% year-to-date.

Of the 12 Wall Street analysts that rated COP, ten rated it Buy, while two rated it Hold. The 12-month median price target of $126.83 indicates a 14.8% potential upside. The price targets range from a low of $106.00 to a high of $142.00.

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 segments. It is headquartered in Courbevoie, France.

On August 24, it was announced that the Bonaparte CCS Assessment joint venture between TTE, INPEX, and Woodside had been awarded a Greenhouse Gas Storage Assessment Permit off the northwest coast of Australia to carry out evaluation and appraisal work on block G-7-AP. This might help the company in achieving its net zero goal by 2050.

On August 23, TTE and its partner SSE Renewables announced the first power generation from the Seagreen offshore wind farm, 27km off the coast of Angus in Scotland. When fully operational, the site is expected to produce around five terawatt hours of renewable electricity per year. It is expected to drive the revenues of the company up.

TTE’s adjusted revenues from sales came in at $70.46 billion for the second quarter of 2022 ended June 30, representing a 69.2% year-over-year growth. Its adjusted consolidated net income grew 178.4% from the prior-year quarter to $9.89 billion, while its cash flow from operations rose 115.7% from the same period last year to $16.28 billion. EPS increased 170% from the prior-year period to $2.16.

Analysts expect TTE’s revenue for the third quarter ending September 2022 to be $69.24 billion, indicating a 41.1% year-over-year growth. The company’s EPS for the same quarter is expected to increase 102.7% from the prior-year quarter to $3.57. Additionally, TTE has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

TTE has gained 22.4% over the past year to close its last trading session at $53.65. The stock has gained 8.8% over the past month.

TTE’s 12-month median price target of $68.00 indicates a 26.8% potential upside. The price targets range from a low of $67.00 to a high of $69.00. Of the three Wall Street analysts that rated the stock, two rated it Buy, and one rated it Hold.

SHEL shares were trading at $54.72 per share on Thursday afternoon, up $0.28 (+0.51%). Year-to-date, SHEL has gained 6.71%, versus a -11.72% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


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