The global energy sector faces supply chain disruptions due to geopolitical headwinds. According to the U.S. Energy Information Administration (EIA), the Brent crude oil spot price will average $98/b in the fourth quarter of 2022 and $97/b in 2023.

Moreover, demand is expected to remain robust. The global consumption of petroleum and liquid fuels is estimated to rise by roughly 2.1 million b/d in the ongoing year and by 2 million b/d in 2023.

Independent oil and gas company Devon Energy Corporation (DVN) has gained significantly amid the soaring energy prices. DVN has gained 55.9% year-to-date, outperforming the broader S&P 500’s 15.9% decline. It has a market cap of $45.01 billion.

The stock closed its last trading session at $68.36. However, DVN’s stock seems pricey in terms of its valuation. Its forward Price/Sales multiple of 2.17 is 59.4% higher than the industry average of 1.36. Also, in terms of its forward Price/Book, the stock is trading at 4.15x, 135.1% higher than the industry average of 1.76x.

So, we think other fundamentally solid oil stocks, Marathon Oil Corporation (MRO) and APA Corporation (APA), are better investments than DVN.

Marathon Oil Corporation (MRO)

MRO operates as an independent exploration and production company in the United States and internationally. It explores, produces, and markets natural gas, natural gas liquids, crude oil, and liquefied natural gas and methanol.

MRO’s total revenues and other income came in at $2.30 billion for the second quarter ended June 30, 2022, up 101.5% year-over-year. Its income from operations increased 1,132.4% year-over-year to $1.29 billion. Moreover, the company’s net income and net income per share increased 5,937.5% and 6,750% year-over-year to $966 million and $1.37, respectively.

MRO’s revenue is expected to increase 51.2% year-over-year to $8.27 billion in the ongoing fiscal year. Its EPS is estimated to increase 212.5% year-over-year to $4.91 in the same period.

The stock has gained 115.2% over the past year to close the last trading session at $24.92.

MRO’s fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

MRO has an A grade in Momentum and Quality and a B for Growth. It is ranked #35 of 96 stocks in the B-rated Energy – Oil & Gas industry. Click here to access MRO ratings for Stability, Sentiment, and Value.

APA Corporation (APA)

APA, through its subsidiaries, explores, develops, and produces oil and gas properties. It conducts business in the United States, Egypt, and the United Kingdom and engages in offshore exploration.

On August 23, APA announced an oil discovery offshore Suriname at Baja-1 in Block 53, which was drilled to a depth of 5,290 meters and encountered 34 meters of net oil pay in a single interval within the Campanian. “This result confirms our geologic model for the Campanian in the area and helps to de-risk other prospects in the southern portion of both Blocks 53 and 58,” said John J. Christmann, APA CEO, and president.

For the fiscal second quarter ended June 30, 2022, APA’s total revenues came in at $3.05 billion, up 71.3% year-over-year. Its net income increased 193% year-over-year to $926 million. Moreover, the company’s EPS increased 230.5% year-over-year to $2.71.

Analysts expect APA’s revenue to increase 35.8% year-over-year to $10.77 billion in the fiscal year 2022. Its EPS is estimated to increase 141.7% year-over-year to $9.43 in the same period. The company also beat the consensus EPS estimates in three of the trailing four quarters.

The stock has gained 87.8% over the past year to close the last trading session at $37.06.

It is no surprise that APA has an overall B grade, equating to a Buy in our POWR Ratings system. The stock has an A grade for Momentum and Quality and a B for Growth and Value. It is ranked #8 in the same industry. 

Click here to learn the additional POWR Ratings for Stability and Sentiment for APA.

MRO shares rose $0.01 (+0.04%) in after-hours trading Thursday. Year-to-date, MRO has gained 57.47%, versus a -15.08% rise in the benchmark S&P 500 index during the same period.

About the Author: Komal Bhattar

Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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