Brent crude oil prices will average $47 a barrel in 2021, according to an Energy Information Administration report. Prices could rise in the near-term if OPEC members extend oil production cuts for three months beginning January, which they recently agreed to do.
However, members in the broader OPEC+ group also need to agree with the planned cuts. And on Monday talks between OPEC members on oil output policy were postponed until Thursday, as participants continue to disagree on the amount of oil they should pump due to the weak demand from the COVID-19 pandemic.
As industrial production has re-engaged globally, the demand for crude oil has been recovering from the all-time lows, and is expected to return to near pre-pandemic levels in the near future. This should drive the performances of oil stocks such as Total S.A. (TOT), Enbridge Inc. (ENB), Halliburton Company (HAL) and Hess Corporation (HES).
Total S.A. (TOT)
TOT is an integrated oil and gas company operating in four industry sectors – Exploration & Production, Integrated Gas, Renewables & Power, Refining & Chemicals, and Marketing & Services.
On November 18th, TOT announced that it has been awarded a contract to manage 2300 public Electric Vehicles (EV) charge points for the Belib’ network in Paris for the next 10 years. This expansion of operation in the French capital will enable TOT to accelerate its transformation into a broad energy company.
TOT has recently completed the world’s largest LNG bunkering operation with CMA CGM at the port of Rotterdam. The development demonstrates TOT’s pledge to advance the use of LNG as a marine fuel and marks the shipping industry’s first commercial use of biomethane on this scale.
TOT’s LNG sales increased 9% year-over-year to $8.10 million in the third quarter ended September 2020. Cash flow from operating activities increased 25.1% sequentially to $4.35 billion in the third quarter.
The consensus EPS estimate of $2.72 for the next year indicates a 123% increase year-over-year. Moreover, TOT has an impressive earnings surprise history, with the company beating consensus EPS estimates in each of the trailing four quarters. The consensus revenue of $201.91 billion for the next year indicates a 19.7% increase from the same period last year. The stock has gained 12.1% over the past six months.
How does TOT stack up for the POWR Ratings?
A for Trade Grade
A for Peer Grade
B for Overall POWR Rating.
It is also ranked #1 out of 32 stocks in the Foreign Oil & Gas industry.
Enbridge Inc. (ENB)
ENB is an energy infrastructure company that provides pipelines for transportation of crude oil, natural gas and other liquid hydrocarbons. The company operates in the United States and Canada in five sectors: Liquids Pipelines, Gas Transmission and Midstream, Gas Distribution and Storage, Renewable Power Generation, and Energy Services.
The company recently announced the commencement of construction of its Line 3 Replacement Project in Minnesota. When complete, the construction will strengthen the company’s core business infrastructure and help it gain significant economic benefits.
ENB’s transportation and other services revenue increased 8.7% year-over-year to $3,144.47 million for the third quarter ended September 2020. Net income increased 4.3% year-over-year to $763.93 million, while EPS grew 4.2% from the year-ago value to $0.38.
The consensus EPS estimate of $2.06 for the next year indicates an 8.3% increase year-over-year. The consensus revenue of $30.46 billion for the next year indicates a 1.7% increase from the same period last year.
It’s no surprise that ENB is rated “Buy” in our POWR Ratings system. It has an “A” for Peer Grade and a “B” for Trade Grade. Among the 32 stocks in the Foreign Oil & Gas industry, it is ranked #2.
Halliburton Company (HAL)
HAL is a leading oil and natural gas company that provides drilling and evaluation, pipeline and process services. In addition, the company offers integrated exploration, drilling, and production software, as well as related professional and data management services.
Earlier this year, HAL was awarded a contract by PTTEP to design and implement a series of digital transformation projects as part of PTTEP’s Advanced Production Excellence (APEX) Initiative.
HAL’s revenue from the Latin American market has increased 9.8% sequentially to $380 million in the third quarter ended September 2020.
The consensus EPS estimate of $0.66 for the current quarter ending December 2020 indicates a 6.4% improvement from the year-ago value. Moreover, HAL beat the street EPS estimates in each of the trailing four quarters, which is impressive. The stock has gained 41.2% over the past six months.
HAL’s strong fundamentals are reflected in its POWR Ratings. It has a “Buy” rating with a “B” for Trade Grade and Peer Grade. It is ranked #2 out of 60 stocks in the Energy – Services industry.
Hess Corporation (HES)
HES is an exploration and production company that is involved in purchasing, transporting and selling crude oil, natural gas liquids and natural gas. The company conducts its operations through in o sectors – Exploration & Production and Midstream.
On November 6th, the company announced sale of 28% working interest in the Shenzi Field of Gulf of Mexico to BHP, for $505 million. This transaction will enable HES to strengthen its cash and liquidity position. Also, the company expects to use the proceeds to fund its investment project in Guyana.
HES recently announced the 18th oil discovery on the Stabroek Block, offshore Guyana, at the Redtail-1 well. The find is an indication of the company’s increased oil discovery and production capacity.
HES’s revenue increased 39.7% sequentially to $1.18 billion in the third quarter ended September 2020. Cash flow from depreciation, depletion and amortization rose 1.8% to $518 million over this period. The consensus EPS estimate for the current quarter ending December 2020 indicates a 58.3% improvement from the year-ago value.
HES’s promising outlook is reflected in its POWR Ratings. It is rated “Buy” with an “A” for Peer Grade and a “B” for Trade Grade. It is ranked #4 out of 97 stocks in the Energy – Oil & Gas industry.
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TOT shares were trading at $43.43 per share on Tuesday afternoon, up $1.29 (+3.06%). Year-to-date, TOT has declined -16.35%, versus a 15.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Imon Ghosh
Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization. More...
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