The energy market has rarely been brighter, at least in recent history. Energy stocks have been gaining momentum, the latest boost coming from rising oil prices, which recently soared to their highest level in nearly three years, to $75 a barrel. This, as escalating demand – due to the reopening after the pandemic and the US summer season now in full effect – faces reduced production and dwindling inventories.
Indeed, the ongoing rally in the commodity has led to renewed bets that prices could once again hit the psychological key of $100 a barrel – a level not seen since before the oil crash in late 2014.
Not surprisingly, one of the energy sector's leading ETFs – the SPDR S&P Oil & Gas Exploration & Production Fund (NYSE:) – is up about 62% this year to its best level since September 2019 reach. Compare that. to the , which in turn rose only 14.2% in the same period.
Given the current bullish energy environment, with crude oil prices set to test new highs, here are three oil stocks well positioned to extend their march in the coming weeks and months.
1. EOG Resources
Performance to date: +65.1%
Market Cap: $48.1 billion
EOG Resources (NYSE:) is one of the largest independent oil companies and companies in the United States. The company's core activities include exploration, development, production and marketing of crude oil, natural gas and natural gas liquids.
Shares of the Houston, Texas-based energy company — which owns premium acreage in the Eagle Ford shale formation in South Texas and the Perm's Delaware Basin — have surged this year, hovering around 65 so far. % increased in 2021.
EOG shares ended Tuesday's session at $82.30, not far from the recent 18-month high of $87.99 reached on June 7. At current levels, it has a market cap of $48.1 billion, making it the fourth largest U.S. oil producer, behind ExxonMobil (NYSE:), Chevron (NYSE:) and ConocoPhillips (NYSE:).
EOG is expected to continue to benefit from improving oil market fundamentals in the coming months, as West Texas Intermediate, the US crude oil benchmark, approached $75 a barrel earlier this week, for the first time in more than two years.
The low-cost shale oil producer has previously said that it only needs an average of $39 per barrel of oil to maintain its current production rate. With oil prices currently well above that level, EOG is poised to generate significant free cash flow, providing it with the means to increase its dividend, which is currently yielding close to 2%, buy back stocks and pay back debt. to pay.
EOG, which reported mixed financial results in early May but announced a special dividend of $1.00, then reports earnings on August 5.
Consensus favors second-quarter earnings of $1.40 per share, significantly better than a loss of $0.23 per share in the same period a year ago. Revenue is expected to reach $3.89 billion, up 253% from revenue of $1.1 billion in the same quarter a year earlier, reaping the benefits of higher oil prices.
In addition to top- and bottom-line numbers, investors will be watching EOG's update on production targets for the coming year and plans to return more cash to shareholders.
2. Occidental Petroleum
Performance to date: +80.8%
Market cap: $29.2 billion
Occidental Petroleum (NYSE:) is one of the largest oil and natural gas producers in the Permian Basin, making it a major player in the US energy sector. Spanning western Texas and southeastern New Mexico, the region accounts for about 30% of total domestic oil production.
The Houston, Texas-based energy company, which saw its shares plummet as the COVID-19 health crisis kicked into high gear last year, has benefited from the recovery in oil prices, gaining about 81% to date.
OXY shares, which hit a pre-pandemic high of $33.01 on June 25, closed at $31.30 Tuesday, earning a valuation of $29.2 billion.
Occidental stands ready to continue to capitalize on its great Permian business, while taking advantage of strong oil prices, which will drive future earnings growth.
OXY, which reported first quarter financial results on May 10, then reports revenues and sales after the US market closes on August 9.
Consensus argues for a loss of $0.15 per share in the second quarter, significantly smaller than a loss of $1.76 in the same period a year ago. Meanwhile, sales are expected to grow nearly 87% year-on-year to $5.47 billion, boosted by strong oil prices and increased global energy demand.
In addition to the top and bottom-line numbers, investors will be watching OXY's update on the outlook for oil and gas production for the remainder of the year and beyond.
Investors will also be eager to hear whether the energy company, which borrowed heavily to fund its $38 billion acquisition of rival Anadarko Petroleum in 2019, plans to take further steps to reduce its high debt burden and return more cash. to shareholders in the form of dividend payments and share buybacks.
3. Continental Resources
Year-to-date performance: +127.5%
Market cap: $13.6 billion
Continental Resources (NYSE:) is one of the leading independent oil and natural gas companies in the country. Nearly all of its reserves are located in the Bakken Shale Deposit in North Dakota and Montana, where the company is currently the largest shale producer in the region. It also has significant drilling assets in the STACK and SCOOP shale games in Oklahoma.
Stocks of the Oklahoma City, Oklahoma-based energy company have outperformed the broader market by a wide margin this year, rising about 128% amid continued oil price increases.
CLR shares – which rose $39.73 late last week to the best level since September 2019 – hit $37.03 yesterday. At current levels, the oil exploration and production company has a market cap of $13.6 billion.
Despite strong gains to date, Continental remains one of the best stocks to buy for investors looking to take advantage of the ongoing recovery in the US oil sector, especially as crude oil prices continue to climb to new highs.
The Bakken-focused shale driller – which posted quarterly earnings and announced it will resume dividend payments – is expected to report its next profit after the US market closes on July 28.
Consensus calls for earnings per share of $0.43 for the second quarter, compared to a loss of $0.71 per share in the same period a year ago. Sales are expected to rise 500% from the same quarter a year earlier to $1.06 billion, thanks in large part to the dramatic rebound in crude oil prices.
In addition, shareholders will pay close attention to improvements in the company's balance sheet as it continues to reduce debt.
Continental's full-year manufacturing outlook, as well as free cash flow guidance, will also be in focus. The shale oil producer previously forecast cash flow of $3.1 billion from operations, up 30% from earlier expectations, providing it with a cash flush to repay its debts, increasing its dividend to currently 1.20. %, and buy back shares.
