Oil prices rose on Tuesday on concerns about tightening European supply after Russia cut gas supply through a major pipeline. Moreover, Hiroyuki Kikukawa, general manager of research at Nissan Securities, said, “Higher gas prices, triggered by Russia’s gas squeeze, could lead to additional switching to crude from gas and support oil prices.”
Global oil consumption has outperformed its supply since mid-2020, which, combined with the Russian invasion, has increased concerns about a tighter global supply, thereby putting upward pressure on oil prices. The Brent price is expected to average at $104/b this year.
Moreover, the energy sector seems to enjoy favorable investor sentiment, as is evident from Energy Select Sector SPDR Fund’s (XLE) 31.7% year-to-date gains, significantly outpacing the SPDR S&P 500 ETF Trust (SPY) declines of 17.7% over the same period.
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. The company is headquartered in Courbevoie, France.
TTE and its partner Nigerian National Petroleum Corporation (NNPC), recently announced the start of production from the Ikike field in Nigeria. The Ikike project is expected to produce 50,000 barrels of oil equivalent per day at its peak by the end of 2022.
Earlier in the same month, TTE announced signing a contract with Sonatrach for an extension of its Production Sharing Contract for 25 years for the onshore Blocks 404a and 208 in the Berkine basin in Eastern Algeria. “This project is in line with the Company’s strategy to develop low-cost oil while contributing to carbon reduction programs to minimize our carbon footprint,” stated Laurent Vivier, Senior Vice President Middle East, and North Africa, Exploration & Production at TTE.
TTE’s adjusted net income came in at $8.98 billion for the first quarter of 2022, representing a 198.9% year-over-year growth. Its adjusted EBITDA grew 113.3% from the prior-year quarter to $17.42 billion, while its cash flow from operations rose 36.1% from the same period last year to $7.62 billion. The adjusted EPS increased 209.1% from the prior-year period to $3.40.
Analysts expect TTE’s revenue for the quarter ended June 2022 to be $60.57 billion, indicating a 45.5% year-over-year growth. The company’s EPS for the same quarter is expected to increase 179.9% from the prior-year quarter to $3.56. Additionally, TTE has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
TTE has gained 14.7% over the past year and 4.3% over the past three months to close its last trading session at $49.66.
TTE’s POWR Ratings reflect this promising outlook. The company has an overall rating of A, which translates to Strong 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 and a B for Growth and Sentiment. It is ranked #4 out of 97 stocks in the B-rated Energy – Oil & Gas industry.
Beyond what we’ve stated above, we have also given TTE grades for Value, Stability, and Quality. Get all the TTE ratings here.
Diamondback Energy, Inc. (FANG)
FANG is an independent oil and natural gas company that acquires, develops, and explores unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas.
In June, FANG announced an enhancement in its capital return program. Beginning from the third quarter of this year, the company intends to increase its return of capital commitment to at least 75% of Free Cash Flow.
Additionally, it intends to increase its base dividend to $3.00 per common share annually, beginning with the second quarter of 2022. This reflects on the company’s shareholder return ability.
In May, FANG and Rattler Midstream LP (RTLR) announced that they had entered into a definitive agreement for FANG to acquire all of the publicly held common units representing the limited partner interests in RTLR not already owned by the company and its subsidiaries. This is expected to benefit the companies from the scale of the combined firm.
FANG’s total revenue increased 103.4% year-over-year to $2.41 billion in the first quarter that ended March 31. Its income from operations grew 190.7% from the year-ago value to $1.66 billion, while its net income improved 260.1% year-over-year to $803 million over the period. The company’s earnings per common share increased 227.8% from its year-ago value to $4.36.
The consensus EPS estimate of $6.68 for the fiscal second quarter (ended June 2022) indicates a 178.2% improvement year-over-year. The consensus revenue estimate of $2.43 billion for the same quarter reflects a 44.7% increase from the same period last year.
The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in each of the trailing four quarters.
The stock has gained 47.4% over the past year and 9.7% year-to-date to close its last trading session at $118.28.
It is no surprise that FANG has an overall B rating, equating to Buy in our proprietary rating system. FANG has an A grade for Momentum and a B grade for Quality. It is ranked #25 in the same industry.
Click here to see the additional POWR Ratings for FANG(Growth, Value, Stability, and Sentiment).
COP explores, produces, transports, and markets crude oil, bitumen, natural gas, LNG, and natural gas liquids worldwide. The company primarily engages in conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands, and other production operations.
On July 14, COP announced an investment in a new large-scale LNG facility in Jefferson County, Texas, under development by Sempra (SRE) subsidiary Sempra Infrastructure. This is expected to expand the company’s LNG business.
For the first quarter of 2022, COP’s total revenues and other income increased 82.7% year-over-year to $19.29 billion. Adjusted earnings and adjusted earnings per share came in at $4.29 billion and $3.27, up 375.5% and 373.9% from the prior-year period.
Street EPS estimate for the fiscal second quarter (ended June 2022) of $3.85 reflects a rise of 203.6% year-over-year. Likewise, Street revenue estimate for the same quarter of $19.71 billion indicates an improvement of 93% from the prior-year period. Additionally, COP has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
Over the past year, COP’s stock has gained 60.2% to close its last trading session at $91.09. It has gained 26.2% year-to-date.
This promising prospect is reflected in COP’s POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. COP has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #20 in the same industry.
Beyond what we’ve stated above, we have also given COP grade for Growth, Value, and Stability. Get all the COP ratings here.
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TTE shares were trading at $50.83 per share on Wednesday afternoon, up $1.17 (+2.36%). Year-to-date, TTE has gained 4.81%, versus a -15.25% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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