6 minute read
Zacks Points of Interest Hess Corp, Occidental Petroleum, Marathon Oil, DT Midstream and PHX Minerals
UNDERGROUND MINING
Zacks Points of Interest
The rise in oil and naTural gas prices shows The energy industry's slow recovery from the pandemic-induced depression. Currently, companies' prospects are bright, from exploration and production to refining, as fuel demand has recovered dramatically. The Zacks Oil & Gas US Integrated industry's prognosis has improved as a result of this.
Occidental Petroleum, Hess Corp, Marathon Oil, DT Midstream, and PHX Minerals are among the industry's frontrunners that could benefit from the improving business situation.
DESCRIPTION OF THE INDUSTRY
The Zacks Oil & Gas US Integrated industry is mainly in the upstream and midstream energy business. Upstream operations mark oil and natural gas exploration and production in the United States' booming shale basins. Midstream operations are also pursued by integrated energy firms through collection and processing facilities and transportation pipeline networks and storage facilities.
The upstream industry is, on average, positively connected with oil and gas prices. The produced commodity volumes are then transported via midstream infrastructure, resulting in consistent fee-based revenues. The downstream operations where the transported oil volumes are converted to finished products, such as gasoline, natural gas liquids, and diesel, are also available to the integrated energy companies in the United States.
What Factors Are Influencing the Oil and Gas Integrated Industry in the United States?
OIL PRICES ARE INCREASING
Oil demand is rapidly recovering around the world, despite a scarcity of the product. On the heels of the rapid rollout of coronavirus vaccines and an improving forecast for fuel demand, demand is improving faster than most analysts expected.
The MRP of West Texas Intermediate (WTI) crude is once again trading above $75 per barrel, indicating a significant turnaround from the negative area reached in April. The integrated company's upstream operation is benefiting from the enormous increase in oil prices.
PRICE INCREASES IN GAS
Natural gas prices have risen dramatically in comparison to the previous year. There isn't enough gas to refill the depleted reserve before winter, as countries become increasingly reliant on natural gas for indoor heating. With www.skillings.net | 19
UNDERGROUND MINING
a greater reliance on the commodity as governments seek to use cleaner fuel, gas prices have risen, improving the outlook for gas exploration and production.
THE REFINING INDUSTRY RECOVERS
Refining operations are being aided by rising fuel demand. Demand for gasoline and jet fuel will remain to climb as more people socialize and commute to work.
Consequently, despite increasing refining costs, a strong recovery in end-product demand will continue to drive downstream operations.
FEE-BASED REVENUES ARE STABLE
The integrated firms' midstream operation is less vulnerable to commodity price fluctuation. This is because shippers typically book pipeline and storage assets for the long term, ensuring consistent fee-based earnings.
CLIMATE CHANGE POSITION
Integrated players in the United States have been observing climate change as a considerable risk that requires to be addressed. The industries are now looking at reducing greenhouse gas emissions and flaring rates.
ConocoPhillips just declared that it would be a leader in the energy transition by raising its Scope 1 and 2 GHG emissions intensity reduction targets. The corporation has set a target of a 40-50 percent decrease in intensity by 2030, up from the previous objective of 35-45 percent.
The Zacks Industry Rank denotes a positive outlook.
Within the broader Zacks Oil - Energy sector, the Zacks Oil & Gas US Integrated industry is made up of 11 stocks. the top 35% of more than 250 Zacks industries.
The Zacks Industry Rank of the group, which is essentially the average of the Zacks Ranks of all the member companies, shows that the group's near-term prospects are favorable. According to our findings, the top half of the Zacks-ranked industries outperforms the bottom half by a factor of more than two to one.
Let's take a look at the industry's recent stock-market performance and valuation picture before we provide a few stocks you might wish to investigate.
Industry Outperforms Sector and S&P 500
Over the last year, the Zacks Oil & Gas US Integrated industry has outperformed both the more significant Zacks Oil - Energy sector and the Zacks S&P 500 composite.
Over this time, the industry has increased by 120.7 percent, compared to 35.4 percent for the S&P 500 and 54.8 percent for the broader sector.
Current Valuation for the Industry
Because oil and gas firms are heavily in debt, the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation, and Amortization) ratio makes sense. This is because the valuation metric considers not just the amount of equity but also the amount of debt.
The industry is presently trading at 7.31X, lower than the S&P 500's 15.98X, based on the trailing 12-month enterprise valueto-EBITDA (EV/EBITDA) ratio. However, it is greater than the industry's trailing-12month EV/EBITDA of 5.05X.
The industry has traded at a high of 13.26X, a low of 3.28X, and a median of 5.60X during the last three years.
5 US Integrated Oil Stocks Outperforming the Market
PHX MINERALS
The company's strategy of divesting lower-margin operations while investing in core mining assets has continued to pay off handsomely. The corporation is also working to reduce its debt load and improve its financial condition. Over the last 60 days, the stock with a Zacks Rank #2 (Buy) has had upward earnings estimate revisions for fiscal 2021.
DT MIDSTREAM, INC.
DT Midstream, Inc. is a company that operates in the oil and gas industry. The company has secured substantial cashflows from its long-term contracts with a portfolio of natural gas midstream interstate and intrastate pipelines. DT Midstream has a healthy balance sheet with no long-term debt maturities of more than seven years. The #2 ranked stock has seen higher earnings estimate revisions for 2021 in the month of September 2021.
HESS
Hess is a leading upstream corporation based in New York, with operations in the Bakken, Gulf of Mexico, and offshore Guyana. The company is confident that its position in Guyana is robust enough to support long-term cash flow growth.
There has been no earnings estimate revision for 2021 in the last several days for the stock with a Zacks Rank #3 (Hold). Over the same time period, the stock has had upward earnings estimate revisions for the following year.
MARATHON OIL
Marathon Oil is an exploration and producer based in Houston, Texas, with a primary concentration in the United States. Because of the company's unique business model, it has been able to create large free cash flows, which will be used to reduce debt. Because of the company's robust and long-term business plan, it has been able to increase its quarterly base dividend. In the last several days, there has been no change in the earnings estimate for 2021 for the #3 ranked stock. Over the same time period, the company has seen upward earnings estimate revisions for the coming year.
OCCIDENTAL PETROLEUM (OCCIDENTAL)
Occidental Petroleum, based in Houston, Texas, is an oil and natural gas exploration with a presence in the midstream energy sector. Aside from cost-cutting measures, the corporation has realized acquisition cost synergies, which has helped its bottom line.
Over the last several days, the stock has received higher earnings estimate revisions for its 2021 bottom line. With a Zacks Rank of 3, the stock is expected to boost earnings by 128.1 percent in 2021.
Proud to be your reliable partner.
19260
We have long supported the region’s mining industry by providing safe, reliable and competitively priced electricity. In 2021, half of the energy we provide to all of our customers will come from renewable sources. Together, we power northeastern Minnesota’s economy.
