As fall approaches, the oil & gas sector is thriving with rising geopolitical tensions, record oil production, and increasing natural gas demand. So, I present quality oil & gas stocks Sunoco LP (SUN), Enterprise Products Partners L.P. (EPD), and CrossAmerica Partners LP (CAPL) that are positioned to navigate challenges and potentially yield significant returns this season. These companies also pay stable dividends.

Oil prices stabilized on Thursday as concerns about deflationary signals from China were disregarded. Brent crude futures increased to $79.62 a barrel, while U.S. West Texas Intermediate (WTI) crude futures rose to $75.39 a barrel.

Moreover, the World Bank has warned that an escalation of the conflict between Israel and Hamas, potentially leading to a broader Middle East conflict, could cause a 75% surge in oil prices. The World Bank’s study warns that the current crisis could coincide with energy market disruptions from Russia’s war in Ukraine, leading to worsened economic consequences.

In addition, U.S. crude oil production is at a record high, leading to an increased number of supertankers arriving at the Gulf Coast for export. In the next three months, 48 vessels are expected to arrive in the U.S., the most in at least six years.

This is happening while top OPEC+ producers like Saudi Arabia and Russia are reducing production to boost oil prices. U.S. crude production reached an all-time high of 13.20 million barrels per day last month, and exports are at their highest levels since restrictions were lifted in 2015. It’s projected that shipments from the U.S. Gulf Coast will increase to 4.10 million barrels a day next month, exceeding December last year by 100,000 barrels.

Furthermore, the U.S. Energy Information Administration (EIA) predicts that U.S. natural gas production and demand will reach new highs in 2023. Dry gas production is expected to increase to 103.72 billion cubic feet per day (bcfd) in 2023 and 105.13 bcfd in 2024, up from the previous record of 99.60 bcfd in 2022. Domestic gas consumption is projected to rise from 88.46 bcfd in 2022 to 89.17 bcfd in 2023.

Considering these conducive trends, let’s take a look at the fundamentals of the three best MLPs – Oil & Gas  stocks, starting with number 3.

Stock #3: Sunoco LP (SUN)

SUN is a distributor and retailer of motor fuels in the United States. The company operates through the two broad segments of Fuel Distribution and Marketing, purchasing motor fuels from independent refiners and oil companies and supplying to independent dealer stations; and All Other.

On October 20, 2023, SUN declared a quarterly distribution for the third quarter of 2023 of $0.8420 per common unit or $3.368 per common unit on an annualized basis. The distribution will be paid on November 20, 2023.

With a four-year dividend yield of 9.65%, its annual dividend yields 6.28% on the current market price.

On September 20, 2023, SUN completed an offering of $500 million 7.000% Senior Notes due 2028. SUN used the net proceeds from the offering to repay a portion of the outstanding borrowings under its $1.50 billion revolving credit facility.

In the fiscal third quarter ended September 30, 2023, SUN’s total revenues amounted to $6.32 billion. Its motor fuel sales stood at $6.17 billion and non-motor fuel sales rose 21.1% year-over-year to $109 million. Its operating income grew 125.3% year-over-year to $338 million. Moreover, the company reported an adjusted Distributable Cash Flow of $181 million.

SUN’s EPS and revenue are expected to rise 128.6% and marginally year-over-year to $0.96 and $5.96 billion in the fiscal fourth quarter ending December 2023. The company has exceeded the consensus revenue estimates in each of the trailing four quarters, which is remarkable.

Over the past year, shares of SUN have gained 23.1% to close its last trading session at $52.86.

SUN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted optimally.

The stock has an A grade for Growth and a B for Sentiment and Stability. It is ranked #6 among 26 stocks in the A-rated MLPs – Oil & Gas industry.

In addition to the POWR Ratings highlighted above, one can access SUN’s ratings for Value, Momentum, and Quality here.

Stock #2: Enterprise Products Partners L.P. (EPD)

EPD provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products in North America. The company’s segments include NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services.

On October 31, EPD announced four new capital projects to support growing production in the Permian Basin. These include two natural gas processing plants, the Bahia NGL pipeline, NGL fractionator 14, and an associated deisobutanizer at its Texas complex, with expected service commencement in 2025. EPD anticipates continued growth in crude oil, natural gas, and NGL production in the Permian Basin throughout the decade.

On October 3, EPD declared a quarterly cash distribution to be paid to common unitholders with respect to the third quarter of 2023 of $0.50 per unit. The company pays an annual dividend of $2, which translates to a yield of 7.58% on the current market price. Its four-year average dividend yield is 8.03%.

The quarterly distribution will be paid to common unitholders on November 14, 2023. This distribution represents a 5.3% year-over-year increase. This year marks the partnership’s 25^th consecutive year of distribution growth.

In the fiscal third quarter that ended September 30, 2023, EPD reported revenues of $12 billion. The company’s total costs and expenses decreased 24.8% year-over-year to $10.43 billion. Its non-GAAP FCF increased 51% from the previous-year quarter to $870 million. The company’s non-GAAP distributable cash flow rose marginally year-over-year to $1.87 billion.

Analysts expect EPD’s EPS and revenue for the fiscal year 2024 to increase 6.7% and 4.3% year-over-year to $2.66 and $51.11 billion.

The stock gained 7.6% year-to-date to close the last trading session at $25.96.

EPD’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has a B grade for Value, Momentum, and Stability. It is ranked #3 in the same industry.

Click here to see the other ratings of EPD for Growth, Sentiment, and Quality.

Stock #1: CrossAmerica Partners LP (CAPL)

CAPL engages in wholesale motor fuel distribution, convenience store operations, and retail real estate ownership/leasing. Its Wholesale segment distributes fuels to various entities; and the Retail segment sells convenience items and motor fuels at both company-operated and commission agent-operated sites.

On October 23, CAPL declared a quarterly distribution of $0.5250 per unit attributable to the third quarter of 2023 (annualized $2.10 per unit). The distribution attributable to the third quarter is payable on November 10, 2023.

Its annual dividend translates to a 9.86% yield on the prevailing price level, compared to a four-year average dividend yield of 11.56%.

During the fiscal third quarter that ended September 30, 2023, CAPL reported operating revenues of $1.21 billion. Its gross profit amounted to $100.44 million. Its adjusted EBITDA stood at $44.21 million. Also, distributable cash flow reached $31.39 million.

Street expects CAPL’s EPS and revenue to grow 11.8% and 6.2% year-over-year to $0.95 and $4.48 billion for the fiscal year ending December 2024. Also, the company surpassed the consensus EPS estimates in three of four trailing quarters.

The stock has gained 12.6% over the past three months, closing the last trading session at $21.25. It soared 7.2% year-to-date.

CAPL’s robust prospects are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.

CAPL has an A grade for Sentiment and a B for Stability. It has topped the same industry.

To access the additional CAPL Growth, Value, Momentum, and Quality ratings, click here.

What To Do Next?

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EPD shares were trading at $25.96 per share on Thursday morning, down $0.00 (0.00%). Year-to-date, EPD has gained 15.96%, versus a 15.43% 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. More...

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