The major stock market indexes climbed for the second day in succession yesterday after President Biden reassured the nation that his government has no plans to return to March 2020 style pandemic-driven lockdowns. Investment bank Goldman Sachs Group Inc. (GS) believes that oil demand will reach a new high in 2022 and again in 2023. GS’ head of energy research, Damien Courvalin, believes that oil prices can soar to $100 per barrel.

Because demand for oil and gas continues to outstrip supply, Brent crude and U.S. crude prices have climbed above $80 per barrel. And although the omicron variant has been a spoilsport, international travel is expected to pick up gradually because several economies boast increased vaccination levels. According to Art Hogan, chief market strategist at National Securities, “The omicron’s potential damage to economic activity will be reasonably short and shallow.”

Given this backdrop, we think it could be wise to bet on quality oil-related stocks as Suncor Energy Inc. (SU), Occidental Petroleum Corporation (OXY), Marathon Oil Corporation (MRO), and APA Corporation (APA).

Suncor Energy Inc. (SU)

Based in Calgary, Canada, SU is an integrated energy company that operates through oil sands; exploration and production; and refining and marketing segments. While its oil sands segment includes operations in Athabasca oil sands, its E&P segment includes offshore activities, such as crude oil and natural gas production.

SU announced on December 13 that its upstream production is expected to be between 750,000 and 790,000 barrels of oil equivalent per day (boe/d) in its fiscal year 2022, which is roughly 5% higher than the expected 2021 levels. Furthermore, the company’s president and CEO, Mark Little, said, “Our strong execution in 2021 and confidence in our plan enabled us to double the dividend, increase the buyback program to 7% of the public float, and reduce net debt at the highest annual pace ever.”

SU’s net earnings for its fiscal third quarter, ended September 30, 2021, came in at CAD877 ($678.35 million), versus a CAD12 million ($9.28 million) net loss in the year-ago period. The company’s operating earnings came in at CAD1.04 billion ($806.75 million), compared to a CAD338 million ($261.44 million) operating loss. Also, its total upstream production of oil increased 13.3% year-over-year to 698,600 barrels.

Analysts expect SU’s EPS and revenue for its fiscal 2022 to increase 41% and 11.9%, respectively, year-over-year to $3.13 and $34.79 billion. The stock has gained 42.8% in price year-to-date to close yesterday’s trading session at $23.97.

SU’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall B rating, which translates to a Buy. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

It has an A grade for Growth and Momentum and a B grade for Quality. Within the B-rated Energy – Oil & Gas industry, it is ranked #22  of 81 stocks. Click here to see the additional ratings of SU for Value, Stability, and Sentiment.

Occidental Petroleum Corporation (OXY)

OXY is a Houston, Tex.-based energy company engaged in oil and gas exploration and production activities in the United States, the Middle East, and Africa. The company’s segments include oil and gas; chemical; and midstream and marketing.

On October 13, 2021, OXY announced that it had agreed to sell its interests in two offshore fields in Ghana for $750 million to Kosmos Energy and Ghana National Petroleum Corp. This sale will likely help the company reduce its debt.

For its fiscal third quarter, ended September 30, 2021, OXY’s non-GAAP net income was $836 million, compared to a  $788 million net loss in the year-ago period. The company’s operating cash flow increased 257% year-over-year to $2.91 billion. And its non-GAAP EPS came in at $0.87, up 202.3% year-over-year.

For the quarter ending March 31, 2022, OXY’s EPS is expected to increase 706.7% year-over-year to $0.91. The company’s revenue for the quarter ending December 31, 2021, is expected to increase 118.7% year-over-year to $7.32 billion. The stock has gained 65.2% in price year-to-date to close yesterday’s trading session at $28.60.

OXY’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. It has an A grade for Momentum and a B grade for Growth and Quality. It is ranked #12 in the Energy – Oil & Gas industry. To see the additional ratings of OXY for Value, Stability, and Sentiment, click here.

Marathon Oil Corporation (MRO)

Exploration and production company MRO operates in the United States and international segments. Its United States segment explores, produces, and markets crude oil and condensate, natural gas liquids, and natural gas. And its international segment produces, and markets liquefied natural gas and methanol in Equatorial Guinea. MRO is based in Houston, Tex. 

MRO’s adjusted revenue for its fiscal third quarter, ended September 30, 2021, increased 92.7% year-over-year to $1.45 billion. The company’s non-GAAP net income came in at $310 million, compared to a $219 million net loss in the year-ago period. In addition, its non-GAAP EPS came in at $0.39, up 239.2% year-over-year.

Analysts expect MRO’s EPS and revenue for the quarter ending December 31, 2021, to increase 550% and 86%, respectively, year-over-year to $0.54 and $1.54 billion. It surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 140.6% to close yesterday’s trading session at $15.76.

MRO’s POWR Ratings reflect solid prospects. According to our proprietary rating system, it has an overall rating of B, translating to a Buy. It has an A grade for Momentum and a B grade for Growth, Sentiment, and Quality. Again, it is ranked #18 in the Energy – Oil & Gas industry. Click here to see the other ratings of MRO for Value and Stability.

APA Corporation (APA)

Houston. Tex.-based APA, through its subsidiaries, explores for and produces oil and gas properties. Its operations are across the United States, Egypt, the United Kingdom, and offshore Suriname. The company also gathers and processes transmission assets in West Texas and owns four Permian-to-Gulf coast pipelines.

On November 30, 2021, APA announced that the Egyptian parliament had approved an agreement to modernize and consolidate its production sharing contracts with Egypt’s Ministry of Petroleum and Mineral Resources and the Egyptian General Petroleum Corporation. This could help the company expand its reach.

For its fiscal third quarter, ended September 30, 2021, APA’s revenue increased 83.8% year-over-year to $2.05 billion. The company’s adjusted operating cash flow increased 116% year-over-year to $866 million. Its adjusted EBITDAX increased 14.5% sequentially to $1.15 billion.

For the quarter ending December 31, 2021, APA’s EPS is expected to increase 3,060% year-over-year to $1.48. Its revenue for its fiscal year 2021 is expected to increase 51.4% year-over-year to $6.52 billion. It surpassed consensus EPS estimates in each of the trailing four quarters. And the stock has gained 78.5% in price year-to-date to close yesterday’s trading session at $25.34.

APA’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 Momentum and Quality and a B grade for Growth and Value. It is ranked #5 in the Energy – Oil & Gas industry. To see the other ratings of APA (Stability and Sentiment), click here.

Note that APA is one of the few stocks handpicked currently in the Reitmeister Total Return portfolio. Learn more here.

SU shares were trading at $24.18 per share on Wednesday morning, up $0.21 (+0.88%). Year-to-date, SU has gained 47.44%, versus a 26.11% rise in the benchmark S&P 500 index during the same period.

About the Author: Dipanjan Banchur

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...

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