The resurgence of the COVID-19 cases put pressure on the oil & gas industry for several weeks because investors anticipated a potential decline in demand due to anticipated, renewed travel restrictions. However, the recent trend indicates that the price rally witnessed in the first six months of 2021 is not yet over.
Oil prices rose significantly last week, fueled by concerns over U.S. supplies following damage from Hurricane Ida and expectations of higher demand. Furthermore, natural gas prices have risen 99% year-to-date, bolstered by supply concerns and rising demand. Analysts expect natural gas prices to continue to rise. In addition, gas prices could double if there is an especially cold winter.
Amid these encouraging market trends, Wall Street analysts expect oil & gas stocks EOG Resources, Inc. (EOG), Hess Corporation (HES), Cenovus Energy Inc. (CVE), and Diamondback Energy, Inc. (FANG) to rally by more than 45% in price.
EOG Resources, Inc. (EOG)
EOG in Houston, Tex., explores, develops, produces, and markets crude oil, natural gas, and natural gas liquids. Its principal producing areas are 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’s total revenues increased 275.2% year-over-year to $4.14 billion in the second quarter, ended June 30. Its net cash provided by operating activities grew 1,671.6% from its year-ago value to $1.56 billion. EOG’s adjusted net income came in at $1.01 billion, reflecting an 872.5% rise year-over-year. The company’s adjusted EPS increased 852.2% year-over-year to $1.73.
The Street expects EOG’s revenues to rise 47.7% year-over-year to $16.30 billion in the current year. A $7.57 consensus EPS estimate for the current year indicates a 418.5% improvement year-over-year. In addition, EOG surpassed the Street’s EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 76.7% in price to close the last trading session at $67.14. EOG has gained 34.6% year-to-date.
Of the 19 Wall Street analysts that rated EOG, 13 rated it Buy, while six rated it Hold. The $101.56 median price target indicates a potential 51.3% upside from its last closing price. The 12-month price targets range from a low of $78.00 to a high of $119.00.
Hess Corporation (HES)
HES is an exploration and production company that explores for, develops, produces, and sells crude oil, natural gas liquids (NGLs), and natural gas. The New York City-based company operates through two segments—Exploration and Production; and Marketing and Refining.
On September 9, HES announced its oil discovery on the Stabroek Block offshore Guyana at Pinktail. “We are happy to announce our 20th significant discovery on the Stabroek Block, which will add to the discovered recoverable resource estimate of more than 9 billion barrels of oil equivalent,” HES’ CEO John Hess said.
On August 30, HES announced the completion of the sale of its subsidiary Hess Denmark ApS. This should allow the company to strengthen its cash and liquidity position. The company plans to use the proceeds to fund its investment opportunity in Guyana.
For the second quarter, ended June 30, HES’ adjusted net income stood at $74 million, up 123.1% from the same period last year. Its adjusted net income per common share increased 122.9% from its year-ago value to $0.24. Its cash and cash equivalents balance rose 47.6% from the prior-year quarter to $2.43 billion.
A $1.47 billion consensus revenue estimate for its fiscal third quarter (ending September 2021) indicates a 24.9% increase year-over-year. The Street expects the company’s EPS to rise 169% from the prior-year quarter to $0.49 in the current quarter. HES has a notable earnings surprise history as well; it beat the consensus EPS estimates in three of the trailing four quarters.
HES has gained 55.7% in price over the past year to close the last trading session at $67.77. The stock has gained 28.4% year-to-date.
Among the 13 Wall Street analysts that rated HES, 10 rated it Buy, while three rated it Hold. The $100.08 median price target indicates a potential 47.7% upside from its last closing price. The 12-month price targets range from a low of $83.00 to a high of $120.00.
Cenovus Energy Inc. (CVE)
CVE develops, produces, and markets crude oil, natural gas liquids, and natural gas in Canada, the United States, and the Asia Pacific. The company operates through Oil Sands; Conventional, and Refining and Marketing segments. It is based in Canada.
On September 8, CVE entered agreements with its partners in the Atlantic region to restructure its working interests in its Terra Nova and White Rose projects. Following this, the company expects its gross production to reach approximately 29,000 barrels per day in 2023. In addition, CVE also expects to receive $78 million from existing partners as a contribution towards the asset’s future productivity.
On July 22, CVE entered a power purchase agreement (PPA) to buy solar-power-produced electricity and its associated emissions offsets from a partnership between Elemental Energy Inc. and Cold Lake First Nations (CLFN). This move is in line with CVE’s ambition of achieving net-zero emissions by 2050.
CVE’s revenues increased 386.5% year-over-year to CAD10.58 billion ($8.35 billion) in its fiscal second quarter, ended June 30. Its gross sales grew 406.2% from its year-ago value to CAD11.11 billion ($8.76 billion), while its net earnings improved 195.3% year-over-year to CAD224 million ($176.69 million). The company’s EPS increased 157.9% year-over-year to CAD0.11 ($0.087).
Analysts expect CVE’s revenues to increase 178.8% year-over-year to $29.83 billion in the current year. And its revenue is expected to increase 1.1% year-over-year in the following year. And the $1.31 consensus EPS estimate for the next year indicates a 55.2% rise from the current year.
CVE’s shares have gained 105.7% in price over the past year and 38.6% year-to-date.
Of the 10 Wall Street analysts that rated CVE, eight rated it Buy, while two rated it Hold. The $12.16 median price target indicates a potential 45.3% upside from its last closing price of $8.37. The 12-month price targets range from a low of $8.68 to a high of $15.40.
Diamondback Energy, Inc. (FANG)
FANG operates as an independent oil and natural gas company focused on acquiring, developing, exploring, and exploiting unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas. The company is headquartered in Midland, Tex.
On June 21, FANG announced the redemption of $191 million of outstanding legacy 4.625% senior notes due 2021 issued by Energen Corporation, one of FANG’s subsidiaries. The internally generated cash flow and the proceeds have enabled the company to reduce its absolute debt load and strengthen its balance sheet. FANG plans to further reduce its callable debt in the second half of this year.
FANG’s total revenues increased 295.5% year-over-year to $1.68 billion in the second quarter ended June 30. Its income from operations grew 135.7% from the year-ago value to $955 million. FANG’s net income improved 113% year-over-year to $311 million over the period. The company’s EPS increased 111.3% year-over-year to $1.71.
A $5.46 billion consensus revenue estimate for the current year indicates a 93.9% improvement from the last year. Analysts expect the company’s EPS to come in at $10.02 in the current year, indicating a 229.6% rise year-over-year. FANG surpassed the Street’s EPS estimates in each of the trailing four quarters.
FANG has gained 55% in price year-to-date. The stock has gained 149.5% over the past year to close the last trading session at $75.04.
Out of the 14 Wall Street analysts that rated FANG, 13 rated it Buy, while one rated it Hold. The $112.86 median price target indicates a potential 50.4% upside from its last closing price. The 12-month price targets range from a low of $95.00 to a high of $126.00.
EOG shares were trading at $70.11 per share on Monday afternoon, up $2.97 (+4.42%). Year-to-date, EOG has gained 44.82%, versus a 20.02% 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. More...
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