This month commenced with U.S. crude oil prices soaring by 5.4% to $116.57 per barrel, the highest price since 2008. Since then, oil prices have shown a downtrend on Russia and Ukraine's ceasefire talks. However, oil prices continue to hover above-normal levels and might soar to a fresh high on a further deepening of the global supply crunch. Experts expect oil prices to remain high in the near future. Bjørnar Tonhaugen, head of oil markets at Rystad Energy, said, "I wouldn't rule out $200 a barrel just yet. It's too soon."
Thus, oil and gas stocks could witness significant investor attention in the near term. Investors’ interest in this space is already evident in the VanEck Vectors Oil Refiners ETF’s (CRAK) 2.8% year-to-date returns versus SPDR S&P 500 ETF Trust (SPY) 8.3% decline.
Along with oil, gas prices are also predicted to gallop to new highs in the near term. According to AAA spokesperson Robert Sinclair Jr., “There are things on the horizon that mean gasoline prices going higher. Namely the summer blends of gasoline.” Furthermore, the EIA has increased its projected international benchmark Brent crude oil price to $116 per barrel for the second quarter of 2022. Given the backdrop, we think fundamentally strong oil and gas stocks Marathon Petroleum Corporation (MPC), Devon Energy Corporation (DVN), Baker Hughes Company (BKR), APA Corporation (APA), and Talos Energy Inc. (TALO) could be solid bets now.
Marathon Petroleum Corporation (MPC)
MPC in Finlay, Ohio, is an integrated downstream energy company with its subsidiaries primarily in the United States. It operates in two segments: Refining & Marketing; and Midstream.
On Feb. 2, 2022, President and CEO Michael J. Hennigan said, “On our portfolio, we completed the Speedway sale, started up our Dickinson renewable diesel facility, and progressed the conversion of our Martinez refinery into a renewable fuels facility. Commercially, we executed initiatives to enhance the value of our assets by securing logistically advantaged feedstocks through our JV with ADM to supply feedstock to Dickinson and adding pretreatment facilities.”
For the fourth quarter, ended Dec. 31, 2021, MPC’s total revenues and other income increased 95.8% year-over-year to $35.61 billion. The company’s net income came in at $774 million, up 171.6% year-over-year. Also, its EPS was $1.27, up 188.6% year-over-year.
Analysts expect MPC’s revenue to be $129.33 billion in 2022, representing a 6.9% year-over-year increase. The company’s EPS is expected to rise 102% to $4.95 in 2022. In addition, it has surpassed the consensus EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 33.2% in price to close yesterday’s trading session at $74.86.
MPC’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
In addition, it has a B grade for Growth, Sentiment, and Quality. MPC is ranked #8 among 87 stocks in the A-rated Energy - Oil & Gas industry. Click here to see the additional POWR Ratings for MPC (Value, Momentum, and Stability).
Devon Energy Corporation (DVN)
DVN, an Oklahoma City, Okla.-based independent energy company, engages primarily in the exploration, development, and production of oil, natural gas, and natural gas liquids in the United States. It operates approximately 5,134 gross wells.
On Feb. 15, 2022, Rick Muncrief, president, and CEO, said, “As I look ahead, the value proposition of Devon only strengthens. Our business is streamlined to capture the benefits of higher commodity prices, and we will remain extremely disciplined by prioritizing value over the pursuit of volume. This shareholder-friendly approach will translate into differentiated cash returns and excellent returns on capital employed.”
DVN’s oil, gas, and NGL sales came in at $2.98 billion for the fourth quarter, ended Dec. 31, 2021, up 279.8% year-over-year. Its total revenues increased 233.8% year-over-year to $4.27 billion. Furthermore, its net earnings came in at $1.51 billion, compared to a $102 million loss. The company’s EPS came in at $2.23, compared to a $0.27 loss per share.
Analysts expect DVN’s revenue to be $14.46 billion in 2022, representing an 18.5% year-over-year rise. Its EPS is estimated to increase 91.8% to $6.77 in 2022. It surpassed the Street’s EPS estimates in each of the trailing four quarters. And over the past year, the stock has gained 131.7% in price to close yesterday’s trading session at $52.46.
DVN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system.
It has an A grade for Momentum and a B grade for Growth, Quality, and Sentiment. It is ranked #34 in the Energy - Oil & Gas. Click here to see the additional ratings for DVN (Value and Stability).
Baker Hughes Company (BKR)
BKR in Houston, Tex., provides a portfolio of technologies and services to the energy and industrial value chain. It operates through four segments: Oilfield Services (OFS); Oilfield Equipment (OFE); Turbomachinery & Process Solutions (TPS); and Digital Solutions (DS).
On Jan. 20, 2022, Lorenzo Simonelli, BKR’s chairman and CEO said, “We are very excited with the strategic direction of Baker Hughes and believe the company is well-positioned to capitalize on near-term cyclical recovery and for long-term change in the energy and industrial markets. We look forward to another year of supporting our customers, continuing to advance our strategy, and delivering for shareholders in 2022.”
BKR’s revenue came in at $5.52 billion for the fourth quarter, ended Dec. 31, 2021, compared to $5.50 billion in the year-ago period. Its adjusted non-GAAP net income came in at $224 million, compared to a $50 million loss in the previous period. In contrast, its adjusted non-GAAP EPS came in at $0.25, compared to a $0.07 loss per share in the prior-year period.
For its fiscal year 2023, analysts expect BKR’s revenue to increase 10% year-over-year to $24.51 billion. Its EPS is expected to increase 106.3% to $1.3 in 2022. Over the past year, the stock has gained 46.2% in price to close yesterday’s trading session at $33.65.
BKR’s strong fundamentals are reflected in its POWR Ratings. The stock has a B grade for Growth and Momentum. Within the Energy - Oil & Gas industry, it is ranked #48. Click here to see the additional POWR Ratings for Value, Stability, Sentiment, and Quality for BKR.
APA Corporation (APA)
APA, through its subsidiaries, explores for, develops, and produces oil and gas properties. It has operations in the United States, Egypt, and the United Kingdom and has exploration activities offshore Suriname. AP is headquartered in Houston, Tex.
On Feb. 21, 2022, John J. Christmann IV, APA’s CEO and president, said, “The modernized production sharing contract in Egypt, which we finalized in late December, provides a foundation for increased investment and long-term production and free cash flow growth in one of our most important operating areas. In addition, the discovery we announced today with our Krabdagu exploration well in Suriname marks another important step on our path to first oil development in Suriname.”
APA’s oil revenues increased 63.8% year-over-year to $1.27 billion for the fourth quarter, ended Dec. 31, 2021. Its total revenues came in at $2.30 billion, up 88.6% year-over-year. In addition, its net income was $382 million, up 3,720% year-over-year. Also, its EPS came in at $1.05, compared to a $0.04 loss per share in the previous period.
For its fiscal year 2022, analysts expect APA’s revenue to be $8.33 billion, representing a 5% year-over-year rise. In addition, the company’s EPS is expected to increase 88.2% to $7.34 in 2022. It surpassed the EPS estimates in three of the trailing four quarters. And over the past year, the stock has gained 77.6% in price to close yesterday’s trading session at $36.85.
APA has an overall B grade, which equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and Quality. Click here to see APA’s rating for Growth, Value, Stability, and Sentiment. It is ranked #26 in the Energy - Oil & Gas industry.
Note that APA is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.
Talos Energy Inc. (TALO)
TALO in Houston, Tex. is an independent exploration and production company that focuses on exploring and producing oil and natural gas properties in the United States Gulf of Mexico and offshore Mexico. Currently, the company has proved reserves of approximately 161.59 million barrels of oil equivalent.
On Feb. 24, 2022, TALO’s President and CEO Timothy S. Duncan said, “We are excited to begin the appraisal of Puma West, a high-impact exploration discovery from early 2021, with a second well in the latter half of 2022 to accelerate development. In our CCS business, we will make measured investments that will lay the foundation for future success, including maturing our previously announced projects and aggressively pursuing more opportunities along the Gulf Coast.”
TALO’s oil revenues for the fourth quarter, ended Dec. 31, 2021, came in at $320.40 million, up 115.8% year-over-year. Its total revenues were $382.95 million, up 121.9% year-over-year. Also, the company’s net income was $81.01 million, compared to a $430.74 million loss in the year-ago period. Its EPS came in at $0.98, compared to a $5.73 loss per share in the previous period.
TALO’s revenue is expected to increase 7.7% year-over-year to $1.29 billion in 2023. Its EPS is estimated to increase 163.8% to $1.43 in 2022. Over the past year, the stock has gained 2.9% in price to close yesterday’s trading session at $14.21.
TALO has an overall B grade, which equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and a B grade for Growth, Value, and Quality. The stock is ranked #10 in the Energy - Oil & Gas industry. Click here to check additional ratings for Stability and Sentiment for TALO.
MPC shares were trading at $76.17 per share on Thursday morning, up $1.31 (+1.75%). Year-to-date, MPC has gained 19.91%, versus a -8.13% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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