The energy industry is recovering this year from the damage caused by the COVID-19 pandemic as the gradual reopening of economies worldwide drives rising demand for crude oil. Given rising demand, OPEC and its allies have decided to curb their production cuts from this month. Though oil prices are currently depressed owing to lower demand from India and Japan, S&P Platts expects oil demand and prices to peak in July.

The global oil & gas upstream activities market is expected to grow at a 26.6% CAGR to reach $3.34 trillion this year. Growing investor interest in the industry is evident in SPDR S&P Oil & Gas Exploration & Production ETF’s (XOP) 75.9% returns over the past six months compared to S&P 500 Trust ETF’s (SPY) 18.1% gains.

Based on these factors, we think China Petroleum & Chemical Corporation (SNP), Continental Resources, Inc. (CLR), and World Fuel Services Corp. (INT) are ideal investment bets now. Here’s why:

China Petroleum & Chemical Corporation (SNP)

SNP is a China-based energy and chemical company that operates through four segments—Exploration and Production, Refining, Marketing and Distribution, and Chemicals. It produces and trades petroleum and petrochemical products, and offers gasoline, diesel, jet fuel, kerosene, ethylene, synthetic fibers, synthetic rubber, synthetic resins, and chemical fertilizers.

On April 17,  in an interview, Zhang Yuzhuo, SNP Chairman, shared the company’s development prospects regarding  carbon neutrality and the company’s overall strategic approach to hydrogen energy seeking to  become the #1 hydrogen enterprise in China. SNP has increased its investment in hydrogen energy and has constructed hydrogen refueling stations, hydrogen production technologies, hydrogen fuel batteries and hydrogen storage materials in recent years. It plans to build and operate 100 hydrogen refueling stations in 2021, and 1,000 in the next five years, to lead development of hydrogen energy.

Because SNP develops carbon-neutral forests, carbon-neutral gas stations and other distinctive products, it hopes to g achieve carbon neutrality 10 years ahead of China’s target.

In March, SNP signed a long-term purchase and sales agreement with Qatar Petroleum to purchase 2 million tons of liquefied natural gas every year for a term of 10 years. Through this LNG supply agreement, SNP is expected to meet  domestic demand while progressing towards its goal of carbon neutrality.

SNP’s operating profit came in at RMB28.70 billion ($4.47 billion) for the fiscal 2021 first quarter, ended March 31, 2021, compared to a net loss of RMB26.43 billion ($4.11 billion) in the first quarter of 2020. Its net profit came in at RMB18.54 billion ($2.89 billion), compared to a net loss of RMB19.23 billion ($2.99 billion) in the prior-year period. Its EPS came in at RMB0.15 for the quarter versus loss per share of RMB0.16 in the year-ago period.

A $3.97 consensus EPS estimate for the next quarter, ending September 30, represents a 179.6% improvement year-over-year. A $122.77 billion consensus revenue estimate for the current quarter represents a 63.2% rise year-over-year. The stock has gained 22.2% over the past six months to close yesterday’s trading session at $54.06.

It’s no surprise that SNP has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.

The stock has an A grade for Growth and Value, and a B grade for Stability. We have also graded SNP for Momentum, Quality and Sentiment. Click here to access all SNP ratings.

SNP is ranked #6 of 93 stocks in the Energy – Oil & Gas industry.

Continental Resources, Inc. (CLR)

CLR is a crude oil and natural gas company with properties primarily in the north, south, and east regions of the United States. The company sells its crude oil and natural gas production to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies.

On April 28,CLR reinstated its  quarterly dividend at $0.11 per share, payable on May 24. In the first quarter of its fiscal year 2021, CLR’s  produced 151.9 MBopd of oil and 936.5 MMcfpd of natural gas on average, amounting to total production of 307.90 MBoepd.

On April 22, CLR redeemed senior notes worth $230.78 million. The company is accelerating its debt reduction through this redemption, and projects its debt will be below $4 billion by year’s end.

For its fiscal year 2021 first quarter, ended March 31, CLR’s total revenues were  $1.22 billion, which represents more than a 38% rise year-over-year. CLR’s income from operations came in at $405.70 million, compared to a loss of $193.59 million in the first quarter of 2020. The company’s net income for the quarter is $259.64 million, compared to a net loss of $185.66 million in the prior-year period. Also, its EPS was $0.72 for the quarter, compared to a $0.51 loss per share in the year-ago period.

Analysts expect CLR’s EPS to improve 150.7% year-over-year for the current quarter, ending June 30, to $0.36. The consensus revenue estimate for the current quarter is  $1.05 billion, which represents a 496.8% rise year-over-year. The stock has gained 100.1% over the past year, and 108.5% over the past six months. It closed yesterday’s trading session at $30.19.

CLR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.

The stock has a B grade for Growth, Momentum, Quality and Sentiment. In addition to the POWR Ratings grades we’ve just highlighted, one can see CLR’s ratings for Value and Stability here.

CLR is ranked #4 in the same industry.

World Fuel Services Corp. (INT)

INT distributes fuel and related products and services in the aviation, marine, and land transportation industries. Its services  include oil and energy procurement, distribution and storage, operations support, financial, consulting, and technology services.

INT had increased its quarterly cash dividend by 20% to $0.12 per share, which it paid on April 9. The  dividend increase reflects INT’s confidence in its  growth potential.

For the fiscal year 2021 first quarter, ended March 31, 2021, INT’s revenue increased 26.7% sequentially to $5.96 billion The company’s gross profit is $191.60 million, which represents a 16% gain from the fourth quarter of 2020. Its income from operations came in at $37.60 million, which represents a 129.3% rise sequentially. Its adjusted net income came in at $20.70 million for the quarter, up 1781.8% from the prior quarter. Also, its EPS increased 1550% sequentially to $0.33.

Analysts expect INT’s EPS to be $0.29 for its current quarter, ending June 30, which represents a 123.1% improvement year-over-year. Analysts expect the stock’s revenue to be $6.30 billion for the current quarter, up 99.5% from the prior-year period. The company’s EPS is expected to grow at 5% per annum over the next five years. It has gained 33.8% over the past year and closed yesterday’s trading session at $32.46.

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

The stock has an A grade for Value, and a B grade for Growth and Quality. Click here to see the additional ratings for INT (Momentum, Stability and Sentiment).

INT is ranked #5 in the same industry.

SNP shares were trading at $52.91 per share on Tuesday afternoon, down $1.15 (-2.13%). Year-to-date, SNP has gained 18.63%, versus a 10.95% rise in the benchmark S&P 500 index during the same period.

About the Author: Sweta Vijayan

Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market. More...

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