Due to supply constraints and surging demand, oil and gas prices are hovering around record-high levels. According to AAA, the national average for a gallon of gas hit $4.59 in the past week. Furthermore, JP Morgan analysts have projected national average prices will surpass $6.20 per gallon by August. According to the American Petroleum Institute, roughly 59% of gasoline’s cost comes from oil refining. Therefore, the overwhelming demand for crude oil is helping oil and gas companies generate broad profit margins.
Energy giant Shell reported its highest ever quarterly profits in the first quarter of 2022, and analysts expect the momentum to be intact for a more extended period. And this is the case with many other major industry participants. Investors’ interest in the energy sector is evident in the Energy Select Sector SPDR ETF’s (XLE) 10.1% returns over the past month.
So, we think it is wise to bet on quality oil and gas companies PBF Energy Inc. (PBF), Gran Tierra Energy Inc. (GTE), and VAALCO Energy, Inc. (EGY). Their shares have surged to new highs and have more room to run in the near term.
PBF Energy Inc. (PBF)
PBF in Parsippany, N.J. and its subsidiaries engage in refining and supplying petroleum products. The company operates in two segments–Refining and Logistics. The company currently owns and operates six oil refineries and related assets.
On April 28, 2022, Tom Nimbley, PBF’s Chairman and CEO, said, “Looking ahead, demand is continuing to grow. Global product inventories are tight across the board. With these factors as a backdrop, the outlook for refining in 2022 and beyond, especially domestic refining, is favorable. We expect that with solid operating performance, PBF will be able to generate incremental free cash flow that can be used to strengthen our balance sheet and reward our investors.”
PBF’s revenues have increased 85.6% year-over-year to $9.14 billion for the quarter ended March 31, 2022. The company’s income from operations came in at $91 million, up 57.7% year-over-year. Also, its cash and cash equivalents came in at $1.43 billion for the period ended March 31, 2022, compared to $1.34 billion for the period ended Dec. 31, 2021.
For its fiscal year 2022, analysts expect PBF’s revenue to be $34.14 billion, representing a 25.3% year-over-year rise. The company’s EPS is expected to increase by 1,300% year-over-year to $1.68 for the quarter ended Sept.30, 2022. It surpassed the consensus EPS estimates in three of the four trailing four quarters. Over the past nine months, the stock has gained 238.2% in price to close yesterday’s trading session at $30.44.
PBF’s POWR Ratings reflect this promising outlook. The stock 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.
Also, the stock has an A grade for Momentum and a B grade for Growth and Value. Within the B-rated Energy – Oil & Gas industry, it is ranked #36 of 100 stocks. Click here to see the additional POWR Ratings for Stability, Sentiment, and Quality for PBF.
Gran Tierra Energy Inc. (GTE)
Headquartered in Calgary, Canada, GTE, and its subsidiaries explore for and produce oil and gas properties in Colombia and Ecuador. It has total proved undeveloped reserves of around 24.8 million barrels of oil equivalent in Colombia.
GTE’s oil sales increased 82.8% year-over-year to $174.57 million for the quarter ended March 31, 2022. Its net and comprehensive income came in at $14.12 million, compared to a $37.42 million loss in the year-ago period. Furthermore, its EPS came in at $0.04, compared to a $0.10 loss per share in the prior-year period.
For its fiscal year 2022, GTE’s revenue is expected to increase 5.1% to $633.65 million. Its EPS is estimated to increase 273.3% to $0.56 in 2022. And over the past nine months, the stock has gained 219.1% in price to close yesterday’s trading session at $1.55.
GTE’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has an A grade for Value and Momentum and a B for Quality. It is ranked #13 of 41 stocks in the A-rated Foreign Oil & Gas industry. Click here to see the additional GTE ratings for Growth, Stability, and Sentiment.
VAALCO Energy, Inc. (EGY)
EGY in Houston, Tex., is an independent energy company that acquires, explores for, develops, and produces crude oil and natural gas. The company holds an Etame production sharing contract related to the Etame Marin block located offshore the Republic of Gabon in West Africa. It also owns interests in an undeveloped block offshore Equatorial Guinea, West Africa.
On May 3, 2022, George Maxwell, EGY’s CEO, said, “We generated $33.5 million in Adjusted EBITDAX in Q1 2022, a nearly 50% increase over the fourth quarter, further demonstrating our confidence that we can fully fund all our 2022 capital budget from cash on hand and through cash from operations. Enhancing our production, reducing our costs, and extending the economic life at Etame is a driving force for VAALCO’s continued success.”
For the quarter ended March 31, 2022, EGY’s crude oil and natural gas sales increased 72.6% year-over-year to $68.66 million. Its adjusted net income came in at $21.12 million, up 144.1% year-over-year, while its adjusted EPS came in at $0.36, up 140% year-over-year.
EGY’s revenue is expected to come in at $285.70 million for its fiscal period ending Dec. 31, 2022, representing a 43.5% year-over-year rise. The company’s EPS is expected to increase 62.2% to $1.80 in 2022. Over the past nine months, the stock has gained 186.8% to close yesterday’s trading session at $6.54.
It is no surprise that EGY has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Momentum and a B grade for Growth, Sentiment, and Quality.
EGY is ranked #14 of 100 stocks in the Energy- Oil & Gas industry. Click here to see the additional POWR Ratings for EGY (Value and Stability).
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PBF shares were trading at $30.14 per share on Tuesday morning, down $0.30 (-0.99%). Year-to-date, PBF has gained 132.38%, versus a -17.57% 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. More...
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