As people emerged from their homes as the threat of the COVID-19 pandemic diminished, global economic activities surged. So did energy prices, particularly natural gas. This led to massive share gains for natural gas stocks. While prices have cooled a little over the past few weeks, they are starting to rebound again.
The upcoming winter season is partly driving this. Making matters worse is the prediction by experts that this winter will be colder than the past few. The colder it is, the higher demand for natural gas. This leads to higher prices and more gains for natural gas stock prices. Also driving up prices this year is tight supply. So, as it gets colder and people increase their heat, prices go up, and the supply lessens even further.
Yesterday’s news that German regulators suspended certification proceedings for a natural gas pipeline from Russia will likely lead to less fuel this winter in Europe and higher natural gas prices. Considering all these factors, it’s more likely that natural gas stocks have more room to run. That’s why investors should consider adding Whiting Petroleum Corp. (WLL), PDC Energy, Inc. (PDCE), and Occidental Petroleum Corporation (OXY) to their portfolios.
Whiting Petroleum Corp. (WLL)
WLL is a US-based independent oil and gas company. It is engaged in the development, production, acquisition, and exploration activities primarily in the Rocky Mountains region of the United States. The firm explores the production of crude oil, natural gas liquids, and natural gas, with operations principally carried out in the United States.
The company recently reported strong earnings, which beat expectations, driven by a large increase in production and oil price realizations. Natural gas output reached 10,745 thousand cubic feet. As the commodity pricing environment looks bright, WLL should see more growth and higher share prices. Plus, the company’s drilling efficiency has cut costs, leading to attractive cash flows.
WLL has an overall grade of B, which translates into a Buy rating in our POWR Ratings system. The company has a Growth Grade of B as sales are expected to rise 64.3%, and earnings are expected to soar 143.2% year over year in the current quarter. WLL also has a Momentum Grade of A, as the stock is up 8.3% over the past month and 267.3% over the past year.
PDC Energy, Inc. (PDCE)
PDCE is an exploration and production company in the crude oil, natural gas, and natural gas liquids industries. The company has an operation in the Wattenberg Field in Colorado and an operation in the Delaware Basin in Texas. The firm implements multi-well drilling, extended laterals, increased frac stage density, enhanced frac design, and drilling efficiencies through a technology focus.
Its acquisition of SRC in January of last year led to an increase in net acres to its asset portfolio. The majority of the firm’s revenue comes from natural gas. The company recently reported a strong quarter where earnings rose 124% year over year due to better-than-expected production volumes and higher commodity prices. PDCE reported oil & gas sales of $703.1 million, which is 123% higher than the year-ago level.
PDCE has an overall grade of B and a Buy rating in our POWR Ratings system. The company has a Momentum Grade of A, which makes sense as the company is up 183% year to date and 279.5% over the past year. PDCE also has a Quality Grade of A due to a rock-solid balance sheet. As of the end of the most recent quarter, the company had $100 million in cash and no short-term debt.
For the rest of PDCE’s grades (Growth, Value, Stability, and Sentiment), click here. PDCE is ranked #9 in the B-rated Energy – Oil & Gas industry. For more top stocks in this highly rated industry, make sure to visit this link.
Occidental Petroleum Corporation (OXY)
OXY is an independent exploration and production company with operations in the United States, Latin America, and the Middle East. The firm also produces various basic chemicals, petrochemicals, polymers, and specialty chemicals. The company’s reserves are approximately 50% oil, with the rest including natural gas liquids and natural gas.
In the most recently reported quarter, OXY blew past expectations with earnings of $0.87 per share. This compares to a loss of $0.84 in the prior-year quarter. Revenue jumped 107.6% year over year, mainly driven by a rise in commodity prices. Its worldwide realized natural gas liquids prices jumped 129% year over year to $34.01 per barrel, and its worldwide natural gas prices surged 120.6% year over year to $2.89 per thousand cubic feet.
OXY is also benefiting from the stabilization of production volumes and lowering its outstanding debts. The company has an overall grade of B, translating into a Buy rating in our POWR Ratings system. Like the other two companies on this list, OXY also has a strong Momentum Grade. Its Momentum Grade of A isn’t surprising, with a year-to-date return of 84.1% and a one-year gain of 170.3%.
The company also has a Growth Grade of B as earnings are expected to jump 239.7% year over year in the current quarter and 673.3% in the next quarter. To access all OXY’s grades, including Value, Stability, Sentiment, and Quality, click here. OXY is ranked #11 in the B-rated Energy – Oil & Gas industry.
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This article was written by David Cohne, Chief Value Strategist for StockNews.com. David has helped investors find the most profitable stocks for over 20 years.
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WLL shares were trading at $71.21 per share on Wednesday morning, up $1.38 (+1.98%). Year-to-date, WLL has gained 184.84%, versus a 26.40% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers. More...
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