Investors have been betting on energy stocks since early this year, given the rapid rise in economic and industrial activities with the progress made in controlling the COVID-19 pandemic. This is evidenced by the S&P Oil & Gas Exploration & Production Select Industry Index’s 68.3% gains year-to-date, versus the broader S&P 500 index’s 12.9% returns over this period.
Oil prices are currently hovering near their two-year highs, at more than $70 per barrel, driven by rising demand from major economies as industrial and manufacturing activities re-engage. As the major oil consuming emerging markets of India and Brazil recover from recent new waves of coronavirus, the demand for oil is expected to rise further in the near term. OPEC+ expects oil demand to rise 6.6% year-over-year in 2021.
Given this backdrop, we think EOG Resources, Inc. (EOG) and Energy Transfer LP (ET), which have gained more than 70% year-to-date, could be solid bets now.
EOG Resources, Inc. (EOG)
EOG explores for and markets crude oil and natural gas and natural gas liquids. The company operates in New Mexico and Texas in the United States; the Republic of Trinidad and Tobago; the People's Republic of China; and the Sultanate of Oman.
EOG expects to administer $3.70 - $4.10 billion in capital expenditure in 2021 to maintain production at its fourth quarter 2020 rate and to fund growing exploration programs and emission reduction projects. The company also aims to achieve zero routine flaring by 2025 and reach net zero scope 1 and scope 2 GHG emissions by 2040. EOG’s commitment to sustainability should make it a popular stock among ESG investors.
EOG’s operating profit grew 1,506.9% from the year-ago value to $932 million in the fiscal first quarter ended March 31, while its net income improved 6,670% year-over-year to $677 million over the period. The company’s net income per share increased 5,700% year-over-year to $1.16. Its cash and cash equivalents balance rose 16.5% from the prior year quarter to $3.39 billion over this period.
A $3.85 billion consensus revenue estimate for the current quarter, ending June 30, 2021, indicates a 249.1% improvement from the same period last year. Analysts expect the company’s EPS to come in at $1.37 in the current quarter, indicating a 695.7% rise year-over-year. Also, EOG surpassed the Street’s EPS estimates in three of the trailing four quarters.
Shares of EOG have gained 67% over the past year, and 71.3% year-to-date.
It is no surprise that EOG has an overall rating of B, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock also has an A grade for Momentum, and grade B for Growth, Sentiment and Quality. Among the 95 stocks in the Energy - Oil & Gas industry, EOG is ranked #18.
To see additional EOG Ratings for Value and Stability, click here.
Energy Transfer LP (ET)
ET has been a midstream energy leader in the United States for nearly 25 years. The company offers transportation and storage for natural gas, crude oil and refined products. ET’s segments include intra-state transportation and storage, inter-state transportation and storage, midstream, NGL and refined products transportation and services, and crude oil transportation and services.
On June 1, ET priced an offering of 900,000 series H preferred stocks priced at $1,000 per unit. The company raised $900 million in proceeds from the offering, which it plans to use to reduce its debt burden and to fund general partnership expenses.
On April 22, ET announced a quarterly distribution of $0.1525 per common unit for the first quarter, ended March 31, 2021. ET also announced quarterly cash distributions of $0.46, $0.48 and $0.48 per Series C, D and E Preferred Units, respectively, which was paid on May 17.
ET’s revenues increased 46.2% year-over-year to $17 billion in its fiscal first quarter, ended March 31. Its income from continuing operations grew 6,570.5% from the year-ago value to $4.07 billion. ET’s net income came in at $3.64 billion, indicating a 477.7% rise year-over-year. The company’s net income per limited partner unit increased 478.1% year-over-year to $1.21.
The Street expects ET’s revenues to increase 61.1% year-over-year to $62.77 billion in the current year. The company’s EPS is expected to increase 891.7% year-over-year to $1.9 in the current year.
ET gained 61.2% over the past six months to close yesterday’s trading session at $11.30. The stock has gained 82.9% year-to-date.
ET has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. ET has an A grade for Growth and Value. It is ranked #14 in the same industry.
To see additional POWR Ratings for Quality, Momentum, Sentiment and Stability, click here.
EOG shares were trading at $84.49 per share on Monday afternoon, down $0.95 (-1.11%). Year-to-date, EOG has gained 71.43%, versus a 13.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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