Crude oil prices have been increasing, driven by a drop in U.S. crude inventory and hopes of a slower interest rate hike. Goldman Sachs expects Brent crude oil prices to hit $110 a barrel next year.

Moreover, with increasing internal pressure in China to relax Covid restrictions and the expected reopening of the economy, oil and gas prices could climb even higher on rising demand. The rally may be further helped by the seasonal increase in holiday travel as consumers choose to give their inflation worries a much-needed break.

All these tailwinds stand to benefit fundamentally sound oil and gas stocks TotalEnergies SE (TTE), Valero Energy Corporation (VLO), HF Sinclair Corporation (DINO), Amplify Energy Corp. (AMPY), and Adams Resources & Energy, Inc. (AE).

TotalEnergies SE (TTE)

TTE operates globally as an integrated oil and gas company. It operates through four segments: Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services.

On November 22, TTE announced its partnership with Air Liquide to innovate to produce and valorize renewable, low-carbon hydrogen at the Grandpuits zero crude platform. As per the agreement, TTE would be committed to purchasing the hydrogen produced for the needs of its platform, and Air Liquide will invest over €130 million ($134.61 million) in the construction and operation of a new unit producing hydrogen.

This collaboration is in line with the shared ambition of the two companies to get to net zero by 2050.

On November 15, TTE announced that it had completed the joint acquisition with ConocoPhillips (COP) of the 8.16% interest held by Hess (HES) in the Waha concessions in Libya. As a result of this transaction, TTE’s stake in these concessions was increased from 16.33% to 20.41%.

This is yet another milestone in the partnership between TTE and Libya’s National Oil Corporation (NOC) in its efforts to restore and increase the country’s oil production, together with reducing gas flaring to increase supply to power plants for additional electricity supply.

On the same day, TTE, in partnership with ENI, announced a Framework Agreement with the State of Israel to implement the maritime boundary agreement reached between Israel and Lebanon on October 27, 2022. This would allow TTE to begin the exploration of an already identified prospect that might extend both in Block 9 and into Israel waters, thereby promising a potential increase in production.

For the third quarter ended September 30, 2022, TTE’s revenue increased 32.3% year-over-year to $64.92 billion, while its adjusted EBITDA increased 73.7% year-over-year to $19.42 billion. During the same period, the company’s adjusted net income increased 106.8% year-over-year to $9.86 billion, driven by higher oil and gas prices, refining margins, and the good performance of trading activities.

As a result, TTE’s adjusted quarterly EPS increased 117.6% year-over-year to $3.83.

On October 27, TTE announced the third interim dividend of €0.69 ($0.72) per share, indicating an increase of 5% compared to the previous year. In addition, the company also announced a special interim dividend of €1 ($1.04) per share. Annual dividend payout amounts to $2.85 per share, translating to a yield of 4.77% at the current price.

Analysts expect TTE’s EPS and revenue for the fiscal year 2022 (ending December 2022) to come in at $14.29 and $258.51 billion, indicating a growth of 114% and 40% year-over-year, respectively. Moreover, the company has an impressive earnings surprise history, as it has topped the consensus EPS estimates in each trailing four quarters.

TTE’s stock has gained 11.5% over the past month and 19.6% year-to-date to close the last trading session at $60.99.

TTE’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, which translates to a 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 Quality. Within the B-rated Energy – Oil & Gas industry, it is ranked #19 of 92 stocks.

To see additional POWR Ratings of TTE for Growth, Value, Stability, and Sentiment, click here.

Valero Energy Corporation (VLO)

VLO is involved in manufacturing, marketing, and selling transportation fuels and petrochemical products in domestic and international markets. The company operates in three segments: Refining; Renewable Diesel; and Ethanol. Its offerings include conventional, premium, reformulated gasoline; California Air Resources Board (CARB) gasoline and diesel; and other refined petroleum products.

On October 26, VLO declared a regular quarterly dividend of $0.98 per share, payable on December 8, 2022. The company pays $3.92 annually as dividends, which translates to a yield of 2.9% at the current price. Dividend payouts have increased at 7% CAGR over the past five years.

On September 26, VLO announced that it had reduced its debt by approximately $1.25 billion through its previously announced tender offers for various series of VLO’s senior notes. This transaction, combined with debt reduction and refinancing transactions completed in the second half of 2021 and the first half of 2022, collectively reduced Valero’s debt by approximately $3.6 billion.

VLO’s revenues increased 50.6% year-over-year to $44.45 billion in the fiscal 2022 third quarter ended September 30, 2022.  During the same period, the company’s operating income improved 447.2% year-over-year to $3.79 billion, while its adjusted net income amounted to 2.8 billion, up 413.8% year-over-year. The company’s adjusted earnings per share came in at $7.14, registering an increase of 436.8% from the prior-year period.

The consensus EPS estimate of $27.66 for the fiscal year 2022 represents an 884.5% improvement year-over-year. The consensus revenue estimate of $177.60 billion for the current year represents a 55.8% increase from the previous year. The company has an impressive earnings surprise history, as it has surpassed the consensus EPS estimates in each of the trailing four quarters.

VLO has gained 7.8% over the past month and 75.3% year-to-date to close the last trading session at $135.20.

VLO’s POWR Ratings reflect this promising outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. It is also rated A for Momentum and B for Growth, Value, and Quality.

VLO is ranked #2 of 92 stocks within the Energy – Oil & Gas industry.

Click here to see additional POWR Ratings for Sentiment and Stability for VLO.

HF Sinclair Corporation (DINO)

As an independent petroleum refiner, DINO produces and markets high-value light products such as gasoline, diesel fuel, jet fuel, renewable diesel, and other specialty products.

On November 7, DINO announced a regular quarterly dividend of $0.40 per share, payable to shareholders on December 5. The company pays $1.20 annually as dividends, which translates to a yield of 1.92% at the current price.

DINO’s sales and other revenues for the third quarter of the fiscal year ended September 30 came in at $10.60 billion, up 126.2% year-over-year. During the same period, the company’s adjusted EBITDA increased 267.9% year-over-year to $1.50 billion, while the adjusted net income increased 368.3% year-over-year to $982.9 million. This translated to an adjusted quarterly EPS of $4.58, up 257.8% year-over-year.

Analysts expect DINO’s revenue for the fiscal year 2022 to increase 109.7% year-over-year to $38.55 billion, while its EPS is expected to come in at $15.68 for the same period. The stock has gained 2.1% over the past month and 84.8% year-to-date to close the last trading session at $62.60.

DINO has an overall rating of B, equating to a Buy in our POWR Ratings system. It has grade A for Growth and Momentum and grade B for Quality. It is ranked #10 among 92 stocks in the same industry.

In addition to the above, we’ve also rated DINO for Value, Sentiment, and Stability. Get all DINO ratings here.

Amplify Energy Corp. (AMPY)

AMPY operates as an independent oil and natural gas company. It acquires, develops, exploits, and produces oil and natural gas properties in the United States. The company has total estimated proven reserves of nearly 121.2 million barrels of oil equivalent and 2,417 gross producing wells.

On November 1, Martyn Willsher, AMPY’s President and CEO, said, “For the remainder of 2022, we remain focused on improving our future free cash flow generation through prudent asset investments and cost optimization of our assets, while delevering our balance sheet.”

AMPY’s total revenues came in at $126.30 million for the fiscal 2022 third quarter ended September 30, 2022, up 3.7% sequentially. The company’s adjusted EBITDA and net income increased 89% and 61.6% quarter-over-quarter to $30.8 and $47.2 million, respectively. Moreover, its EPS came in at $1.17, up 60.3% over the previous quarter.

The stock has gained 139.1% year-to-date to close the last trading session at $8.32.

AMPY has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Momentum and Sentiment and a grade of B for Value and Quality. It is ranked #33 in the same industry.

Beyond what is stated above, we’ve also rated AMPY for Stability and Growth. Get all AMPY ratings here.

Adams Resources & Energy, Inc. (AE)

AE is primarily involved in the marketing, transportation, terminal ling, and storage of the various crude oil and natural gas basins in the United States. The company operates through three segments: Crude Oil Marketing, Transportation, and Storage; Tank truck Transportation of Liquid Chemicals, Pressurized Gasses, Asphalt, and Dry Bulk; and Pipeline Transportation, Terminalling, and Storage of Crude Oil.

On November 10, AE declared a quarterly cash dividend of $0.24 per common share. The company pays $0.96 annually as dividends, which translates to a yield of 2.47% at the current price. Dividend payouts have grown at 1.8% CAGR over the past five years.

On November 1, AE announced the repurchase of all of the shares of AE common stock owned by KSA Industries, Inc., the company’s largest stockholder, and members of the family of the late Kenneth Stanley Adams, Jr., the company’s founder, who are affiliated with KSA.

With this transaction, AE made a significant return of capital to its existing shareholders and increased the intrinsic value of their stake in the company.

On September 1, AE announced that its subsidiary, Service Transport Company, has opened its 20th terminal in Pittsburgh, PA. This new facility will offer Service Transport’s clients additional resources in the Northeast area of the U.S., providing additional opportunities for revenue and profitability growth while serving as a base of operations for recruiting in the immediate area.

For the fiscal 2022 third quarter ended September 30, AE’s total revenues increased 50.1% year-over-year to $852.90 million. The company’s operating earnings rose 30.1% from the year-ago value to $2.99 million. In addition, its adjusted net earnings came in at $4.71 million or $1.06 per share, up 168.6% and 158.5% year-over-year, respectively.

Analysts expect AE’s revenue for the fiscal year 2022 (ending December 2022) to come in at $3.46 billion, representing a 70.4% rise from the last year. Also, Street expects the company’s EPS for the current year to come in at $3.37, representing an increase of 22.6% year-over-year.

AE’s stock has gained 16.7% over the past month and 38% year-to-date to close the last trading session at $38.93.

AE’s POWR Ratings reflect a strong outlook. The stock has an overall rating of A which translates to a Strong Buy in our proprietary rating system. It has a grade of A for Momentum and Sentiment and a B for Quality and Value.

AE is ranked #4 in the same industry. Get additional ratings for AE’s Growth and Stability here.

TTE shares were trading at $62.57 per share on Wednesday afternoon, up $1.58 (+2.59%). Year-to-date, TTE has gained 30.31%, versus a -13.80% rise in the benchmark S&P 500 index during the same period.

About the Author: Santanu Roy

Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...

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