Oil prices jumped above $80 yesterday and show no sign of slowing down. Brent crude rose 1.5% to close at $83.65 a barrel. The price of Brent crude even hit an intraday high of $84.60 today, its highest price since October 2018. As oil prices have been increasing, and energy companies’ stocks have followed.
This is being driven by the strong pace of the global economic recovery and producers not keeping up. OPEC+, the Organization of the Petroleum Exporting Countries and allies, have held back from increasing supply even as prices have climbed. Plus, a global shortage of natural gas used to power businesses and homes may spill into the oil market.
So, the demand for oil and gas isn’t going away anytime soon. That’s why investors should consider adding energy stocks to their portfolios. I ran a screen for energy stocks in our database with an overall Buy or Strong Buy rating in our POWR Ratings system. Three of the top stocks on this screen included Royal Dutch Shell PLC (RDS.A), TotalEnergies SE ADR (TTE), and BP PLC ADR (BP), which is why I am highlighting them below.
Royal Dutch Shell PLC (RDS.A)
TDS.A is an integrated oil and gas company that explores for, produces, and refines oil worldwide. Its production and reserves are in Europe, Asia, Oceania, Africa, and North and South America. The company generates more than $180 billion in annual revenue and produces more than 2.4 million barrels per day of oil equivalent.
Its acquisition of BG Group five years ago made RDS the world’s largest liquefied natural gas producer. Liquefied natural gas demand is expected to rise due to strong consumption from Asian importers, including China, India, Pakistan, and South Korea. The company’s position as a major supplier of liquefied natural gas should help feed this growing demand and improve cash flow.
The company has also made progress on its green initiatives. For example, it became the first oil company to link executive pay with carbon emissions to combat climate change. The company has also collaborated with companies such as IONITY and First Utility to diversify its portfolio beyond oil and gas. In the meantime, though, RDS is benefiting from a rise in oil prices.
RDS has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B as analysts expect sales and earnings to rise 47.1% and 491.7% year over year this quarter. RDS also has a Momentum Grade of B as the stock has shown strong near and long-term momentum. It is up almost 20% in the past month and 85% over the past year.
We also provide Value, Stability, Sentiment, and Quality grades for RDS, which you can find here. RDS is ranked #16 in the Foreign Oil & Gas industry. For more top stocks in this industry, click here.
TotalEnergies SE ADR (TTE)
TTE is an integrated oil and gas company that explores for, produces, and refines oil worldwide. The company operates refineries with a capacity of nearly 2.0 million barrels a day, primarily in Europe. It also distributes refined products in 65 countries and manufactures commodity and specialty chemicals. The company changed its name from TOTAL SE to TotalEnergies SE to reflect its transition towards a diverse energy company.
The company has the best production growth when compared to its peers. This is due to an upstream portfolio with above industry-average exposure to fast-growing hydrocarbon-producing regions. TTE also uses modern technology in drilling, which helps cost-saving. In addition, the company has low exposure to North America, which is a mature region,
In fact, its upstream assets have lower decline rates and longer productive lives. This gives the company a competitive edge. TEE also makes strategic acquisitions with existing operators in high potential areas and divests its assets that don’t match its long-term objectives. For instance, in the first half of this year, TTE acquired $2.9 billion in assets and sold assets worth $0.9 billion.
TTE has an overall grade of B and Buy rating in our POWR Ratings system. The company has a Growth Grade of A, which isn’t surprising as analysts forecast earnings to surge 393.1% year over year in the current quarter and 269.9% for the year. TTE also has a Momentum Grade of B. The stock is up over 18% over the past month and 26% for the year.
BP PLC (BP)
BP is an integrated oil and gas company that explores for, produces, and refines oil worldwide. While the company became infamous for its oil spill in the Gulf of Mexico ten years ago, it is now on solid footing. The company operates refineries with a capacity of 1.9 million barrels of oil per day. Since the accident, the firm has reduced debt and has been transitioning to lower-carbon fuels.
The company has a solid portfolio of upstream projects. This has generated massive production growth. In fact, over the past five years, it has placed several upstream projects online. This has helped the company ramp up its production per day. BP has also implemented an energy transition plan to capitalize on the increasing demand for clean energy.
The firm set a goal of developing 50 gigawatts of net renewable energy generating capacity. This would be a big jump from the 2.5 gigawatts capacity it has already developed. As part of this plan, BP hopes to reduce emissions from operations by 30-35% and reduce the weightage of hydrocarbons from its portfolio. Plus, the announcement of a reduction in its workforce bodes well for its financials.
BP has an overall grade of B, translating into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B, which makes sense as its EBITDA is up 649.5% over the past year and is expected to rise 30% over the next year. BP also has a Momentum Grade of B as the stock is up close to 50% for the year and close to 20% over the past month.
To access all of BP’s grades, including Value, Stability, Sentiment, and Quality, click here. BP is ranked #23 in the A-rated Foreign Oil & Gas industry.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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RDS.A shares rose $0.05 (+0.11%) in premarket trading Tuesday. Year-to-date, RDS.A has gained 37.87%, versus a 17.57% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|RDS.A||Get Rating||Get Rating||Get Rating|
|TTE||Get Rating||Get Rating||Get Rating|
|BP||Get Rating||Get Rating||Get Rating|