Despite the United States’ release of oil from its strategic reserve, the Eurozone’s ban on Russian crude and supply cuts by OPEC+ are expected to drive prices higher again. Jeff Currie, head of commodities research at Goldman Sachs, anticipates that crude oil prices could jump to $115 a barrel by April next year.

OPEC presented its annual World Oil Outlook at ADIPEC earlier this week. It forecasted that global primary energy demand is set to continue growing in the medium- and long-term, increasing by 23% within 2045.

Investors’ bullish views about energy stocks are evident from the Energy Select Sector SPDR Fund’s (XLE) 59.8% year-to-date returns, compared to the SPDR S&P 500 ETF Trust’s (SPY) 19% decline.

Given this backdrop, fundamentally strong energy stocks TotalEnergies SE (TTE) and APA Corporation (APA) might be ideal investments in 2022.

TotalEnergies SE (TTE)

TTE is an integrated oil and gas company operating worldwide. The company operates through the Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services segments. It is headquartered in Courbevoie, France.

On October 31, TTE announced an oil discovery by the Pedunculo well, located in the northwest of the Sépia oil field near the coast of Rio de Janeiro, Brazil. Once drilled, the net thickness of the well’s oil column turned out to be one of the highest ever recorded in Brazil. This project is expected to enhance the company’s operative capability.

On October 26, TTE announced the creation of a joint venture with Casa dos Ventos (CDV), a Brazil-based renewable energy developer, to jointly develop, build, and operate the renewable portfolio of Casa Dos Ventos. The joint venture in Brazil fits TTE’s strategy of taking advantage of the growth of the deregulated power markets.

Its annual dividend of $2.78 yields 5.07% on current prices. TTE has a 4-year average yield of 6.47%.

TTE’s revenues from sales increased 32.4% year-over-year to $64.96 billion for the third quarter ended June 30. Its adjusted EBITDA rose 73.7% year-over-year to $19.42 billion, while its adjusted earnings per share increased 117.6% year-over-year to $3.83.

Analysts expect TTE’s revenue for the current fiscal year ending December 2022 to be $256.23 billion, indicating a 38.8% year-over-year growth. The company’s EPS for the same quarter is expected to increase 112.9% from the prior-year quarter to $14.22.

TTE has gained 17.8% over the past month to close its last trading session at $54.79.

TTE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

TTE has an A grade for Momentum. Within the B–rated Energy – Oil & Gas industry, it is ranked #21 out of 94 stocks.

Beyond what we’ve stated above, we have also given TTE grades for Growth, Value, Stability, Sentiment, and Quality. Get all TTE ratings here.

APA Corporation (APA)  

APA explores, develops, and produces oil and gas properties. It has operations in the United States, Egypt, and the United Kingdom, as well as exploration activities in offshore Suriname.   

On September 22, APA announced the engagement of GHD, a company that implements and verifies sustainability projects for third-party emission verification. This engagement is expected to help the company eliminate at least one million tons of CO2e by the end of 2024. 

On September 14, APA announced an increase in the company’s dividend on common shares from an annualized rate of 50 cents per share to $1.00 per share. The next quarterly dividend is payable on November 22 at a rate of 25 cents per share on its common stock. Its annual dividend of $1.00 yields 2.2% on current prices. It has a 4-year average yield of 2.86%.

APA’s total revenue and other came in at $2.87 billion for the fiscal third quarter of 2022 ended September 30, representing a 74% year-over-year growth. Its net cash provided by operating activities rose 43.2% year-over-year to $1.10 billion. The company’s adjusted earnings grew 75% from the prior-year quarter to $651 million. Its adjusted EPS increased 101% year-over-year to $1.97. 

The consensus EPS estimate of $8.26 for the current fiscal year ending December 2022 represents a 111.8% improvement year-over-year. The consensus revenue estimate of $10.63 billion for the current year represents a 34% increase from last year. The company has an impressive revenue surprise history, as it surpassed the consensus revenue estimates in three of the trailing four quarters.  

APA has gained 64.5% year-to-date to close its last trading session at $44.24. It has gained 29.4% over the past month.  

As reflected in its fundamentals, APA has an overall rating of A, which translates to Strong Buy in our proprietary rating system. It also has an A grade in Momentum and Quality and a B in Growth and Value. 

Within the Energy – Oil & Gas industry, it is ranked #10. In addition to the POWR Ratings grades highlighted, you can see the APA grades for Stability and Sentiment here.

TTE shares were trading at $55.47 per share on Thursday afternoon, up $0.68 (+1.24%). Year-to-date, TTE has gained 15.52%, versus a -20.48% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...

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