Three Energy stocks ready to perform better on the new oil market Dynamic
The energy supplies have been torn off recently, with the latest boost from rising prices, which sprang up after President Donald Trump pulled the United States out of the nuclear deal with Iran earlier this month. The oil price is currently near the highest level in about three and a half years, with futures, the global benchmark, not far from the $ 80 level.
Brent Crude Weekly
Even before the headlines of the US and Iran, the underlying sentiment on the oil market has been positive for some time, with prices that have risen by 60% since last summer, under investor expectations that OPEC-led production reductions may to free surplus stocks. . Saudi Arabia and Russia have made a leading effort since the beginning of last year to reduce oil production by about 1.8 million barrels per day (BPD) in order to drag global inventories to the five-year average.
The recent surge in oil prices has resulted in renewed betting that Brent could once again reach a $ 100 barrel – a level that had not been seen before the late 2014 price crash. Bank of America Merrill Lynch last week predicted a Brent -price target of $ 90 a barrel by the second quarter of 2019, while next year he sees a “risk of $ 100 a barrel” of oil. “Although, we are worried that this market dynamic may unfold in a shorter period of time,” the analysts wrote in a note
The renowned technical investor Marc Chaikin, who is also the founder and CEO of Chaikin Analytics, recently said that “energy will lead the market” while he adds: “I do not think the current price of oil determines the price in the full ramifications of the Iran deal. “Indeed, it is currently enjoying a five-week win zone, the longest series of weekly gains since September, when it rose about 13%.
SPX Daily
Energy companies not only benefit from the benefits of higher oil prices, but have also made impressive revenues, which has further increased optimism and bullish bets on the sector. According to data from Thomson Reuters, the companies in the sector reported a 86.5% profit growth in the first quarter
Higher oil prices may be the main reason why American energy companies are on fire. But an underlying shift that now makes players on the oil market the biggest beneficiaries of current price trends contributes to the long-term outlook for US oil producers in particular. Last week, in New Oil Market Dynamic: Saudi Arabia calls the shots but real winner is not OPEC, we concluded that the biggest winners of the new paradigm currently active in oil markets have been US shale drilling machines
This is clearly illustrated below. We have reviewed three stocks that we think will perform better in the coming months, along with an additional group of runners who also look promising. Our list varies from known oil majors to semi-precious diamonds in the rough.
To the thousands of energy-related names traded on the market, we will only have companies from the industry that are located in the United States and currently have a market capitalization of $ 2 billion and higher.
1. Most attractive oil drilling company
Whiting Petroleum: + 80% YTD
So far, 2018 was a great year for Whiting Petroleum (NYSE :), the leader in oil production at Baku Shale Deposit in North Dakota. This oil and exploration company has increased to about 80% this year
WLL Daily
It is not difficult to understand why whiting this year was so harsh when you took into account the conclusion of our article from last week (link, above):
“Perhaps the biggest winner of the new paradigm is the American shale industry which has reaped the benefits of higher oil prices.”
Indeed, Whiting has taken advantage of the rebound in crude prices by increasing production to 11.43 million basis points in the first quarter of 2018, according to figures in its latest profit report published on 30 April. Oil prices averaged $ 62.92 per barrel during the first quarter.
Whiting production
Whiting production guidance is approximately 9% higher than the 2017 production forecast for the full year, and predicts annual production in a range between 46,5-47,2 million bpd.
The company has also significantly improved. It recorded a net profit of $ 15 million, or 16 cents per share, in the quarter ended March 31, compared to a loss of $ 87 million, or 96 cents per share, a year earlier.
For the future, Whiting’s share price is still dependent on rough market fundamentals. As long as OPEC continues to reduce production, Whiting Petroleum will step up to maximize profits
Technically the action looks constructive as long as the prices remain above their movement averages of 100 and 200 days, which shows the complete dominance of the bulls. The support levels are at $ 40 and $ 35.
Honorable mention: RSP Perm (NYSE :), an increase of 18% YTD and Diamond Offshore Drilling (NYSE :), an increase of 3% in YTD.
2. Hottest Oil Services Company
Baker Hughes: + 13% YTD
Baker Hughes (General Electric-owned) shares (NYSE 🙂 have recently been at the forefront, as oil prices led companies to boost oil and gas production. The service company, which was most affected by the fall in the oil price that started in mid-2014, is now 13% higher than the year before.
BHGE Daily
The company reported that Wall Street estimates on April 20. Earnings per share rose to 9 cents while analysts’ estimates worsened by 3 cents, while sales increased to $ 5.40 billion compared to $ 5.32 billion a year earlier
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In a promising signal for the coming quarters, revenues from oil field services, which accounted for half of the company’s total revenue, rose 10.1% to $ 2.64 billion in the quarter.
BHGE Operational income by business segment
“The market fundamentals remain supportive, because the prices of crude oil are relatively diverse, which gives customers stability in the evaluation of projects,” said Lorenzo Simonelli, CEO of Baker Hughes, in a statement on the profit release
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Looking ahead, the company received a five-year contract from Kinder Morgan (NYSE 🙂 for the provision of artificial elevator services in the Permian Basin and a subsea equipment contract for the Chevron project Phase II (NYSE) in Australia, it recently announced. Less than a year ago, the conglomerate General Electric (NYSE) combined its oilfield activities with Baker Hughes, making it the second largest oilfield services company to earn revenue.
The combined company achieved $ 144 million of synergies in the first quarter of 2018, putting it on track to reach an expected $ 700 million by the end of the year as the company makes progress in integrating the two companies and ways to save costs.
Honorable mentions: Cactus (NYSE :), an increase of 62% YTD, Halliburton (NYSE :)), an increase of 8% YTD and Schlumberger (NYSE :), an increase of 6% in YTD.
3. Best Performing Oil Refiner
HollyFrontier: + 35% YTD
Shares of HollyFrontier (NYSE 🙂 have been able to continue their solid show in the fourth quarter of 2017, in which they have climbed by no less than 64%, so far a great achievement in the first five months of 2018. HFC & # 39; s Stock has increased to about 35% this year.
HFC Daily
The Dallas-based refinery reported a 70% increase in refining margins in the first quarter when it benefited on 2 May from discounted crude oil charges from the Texas-based Permian Basin and Canada. Gross margins of refineries rose to $ 12.83 a barrel in the first quarter, up $ 5.29 compared to the same period last year and outperformed margins at larger rivals such as Valero Energy (NYSE 🙂 and Marathon Petroleum (NYSE: ).
“HFC’s index of 74% of the indices during the quarter was the highest quarterly average since the third quarter of 2015”, Jefferies analysts wrote in a post-earnings note titled & # 39; The right place on the right time & # 39 ;. HollyFrontier also offered strong guidelines, saying that it expects wider disparities between Perm and Canada to further support the margins in the second quarter. The company plans to operate six refineries up to 92% of their combined crude oil processing capacity of 489,630 bpd
The company is well positioned for further profits thanks to its importance as one of the largest oil refineries in the United States.
A combination of a strong balance sheet, dedication to attractive dividend payments, investments in strategic growth opportunities and a share repurchase program makes HollyFrontier a good bet in the future
Honorable mention: Valero Energy, an increase of 26% YTD and Phillips 66 (NYSE :), an increase of 17% in YTD.
