Although oil prices declined on Monday due to concerns over new COVID-19-related lockdowns in China, the prices could remain elevated because disruptions to Russian oil exports could create a global oil supply crisis. Energy stocks Marathon Oil (MRO), EnLink (ENLC), and Whiting Petroleum (WLL) have doubled in price over the past year and could soar higher in the near term, driven by the industry tailwinds. Let’s discuss.
Oil prices declined more than 8% on Monday on concerns over new COVID-19 lockdowns in China and the possibility of another round of peace talks between Ukraine and Russia this week. However, despite the slide, oil held above $100 per barrel. West Texas Intermediate crude futures, the US oil benchmark, slipped 8.3% to trade at $104.50 per barrel, while the international benchmark Brent crude traded 7.4% lower at $111.61 per barrel.
On the other hand, the International Energy Agency has warned that three million barrels per day of Russian oil output could be at risk beginning in April. This threatens to create a global oil supply shock, and prices could remain elevated. “We still expect that Brent crude will continue to rally as the market continues to price in a rise in energy supply risk amid massive supply disruptions,” TD Securities said.
Given this backdrop, we think energy stocks Marathon Oil Corporation (MROEnLink Midstream, LLCENLC), Whiting Petroleum Corporation (WLL), which have each doubled in price in the past year, could soar higher in the near term.
Marathon Oil Corporation (MRO)
MRO explores for and produces oil and condensate, natural gas liquids, natural gas, and their byproducts. The Houston, Tex., company operates through two segments: the United States and International.
In January, the company announced a dividend of 7 cents per share, which was payable on March 10, 2022. It marked MRO’s fourth consecutive increase in its quarterly base dividend. Furthermore, the company has increased its base dividend by more than 130% over the last year.
MRO’s total revenues and other income increased 116.9% year-over-year to $1.80 billion in its fourth fiscal quarter, ended Dec. 31, 2021. Its income from operations improved 395.6% year-over-year to $739 million. The company’s non-GAAP net income increased 704.1% from its year-ago value to $592 million, while its non-GAAP net income per share stood at $0.77, up 741.7% year-over-year in the same period.
The $0.87 consensus EPS estimate for the fiscal first quarter, ending March 31, 2022, represents a 313.7% improvement year-over-year. The $1.65 billion consensus revenue estimate for the same quarter represents a 54.3% increase from the same period last year. It has an impressive surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
The stock has gained 128% in price over the past year and 54% year-to-date to close yesterday’s trading session at $25.29.
MRO’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which translates to Buy in our POWR ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
MRO has an A grade in Momentum and a B in Growth, Sentiment, and Quality. It is ranked #26 of 89 stocks in the B-rated Energy – Oil & Gas industry.
Beyond what is stated above, we have also rated MRO for Value and Stability. Get all the MRO ratings here.
EnLink Midstream, LLC (ENLC)
ENLC in Dallas, Tex., provides midstream energy services in the United States. It operates through Permian; Louisiana; Oklahoma; North Texas; and Corporate segments.
On Feb. 16, 2022, ENLC announced that it had executed a memorandum of understanding with Talos Energy Inc. (TALO) to jointly develop a complete carbon capture, transportation, and sequestration (CCS) solution for industrial-scale emitters in Louisiana. Thus, advancing its sustainability initiatives.
ENLC’s total revenues increased 110.8% from the prior-year quarter to $2.24 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its operating income for the quarter came in at $161.90 million, reflecting an increase of 75.4% year-over-year, while the net income attributable to ENLC stood at $54.80 million, up 136.2% year-over-year. Also, net income attributable to ENLC per unit increased 135.5% year-over-year to $0.11 in the same period.
The Street expects ENLC’s EPS for the fiscal year ending Dec. 31, 2022, to improve 333% year-over-year to $0.22. The $6.78 billion consensus revenue estimate for the same period represents a 1.4% increase year-over-year.
Over the past year, the stock has gained 113.4% in price to close yesterday’s trading session at $9.58. It has gained 39% year-to-date.
It is no surprise that ENLC has an overall rating of B, which equates to Buy in our POWR Ratings system.
ENLC has an A grade in Momentum and a B in Growth. Among the 35 stocks in MLPs – Oil & Gas industry, ENLC is ranked #17.
In addition to the POWR Rating grades I have just highlighted, one can see ENLC’s ratings for Value, Sentiment, Stability, and Quality here.
Whiting Petroleum Corporation (WLL)
WLL is an independent oil and gas company based in Denver, Colo., that engages in the acquisition, development, and production of crude oil, natural gas, and natural gas liquids, primarily in the Rocky Mountains region of the United States.
On March 7, 2022, WLL and Oasis Petroleum Inc. (OAS) announced their agreement to combine in a merger of equals transaction. This combined company will have a premier Williston Basin position with top-tier assets and combined production of 167.80 thousand boepd. The company expects this combination to generate strong free cash flow while executing a focused strategy and enhancing capital return.
In February, the company announced that it had entered two separate agreements to acquire non-operated oil and gas assets in the Williston Basin of North Dakota. “By increasing our working interest, we are immediately recognizing substantial cash flow that is accretive for shareholders. We know and understand the Sanish field extremely well and are very comfortable with the rate of return we are achieving,” Lynn A. Peterson, President, and CEO of Whiting, commented.
WLL’s total operating revenue for its fiscal fourth quarter, ended Dec. 31, 2021, increased 18% quarter-over-quarter to $473.41 million. Its adjusted net income came in at $168.49 million, reflecting an increase of 19% quarter-over-quarter, while the adjusted EBITDAX was $226.36 million, up 12.6% compared to the prior quarter’s value. Its adjusted net income per share stood at $4.23, reflecting an increase of 18.5% quarter-over-quarter.
Analysts expect WLL’s revenue for its fiscal quarter ending March 31, 2022, to be $374.47 million, indicating a 21.8% increase year-over-year. The company’s EPS is expected to grow 61.1% year-over-year to $4.50. WLL also beat the consensus EPS estimates in each of the trailing four quarters.
WLL shares have gained 135.9% in price over the past year and 25.9% year-to-date to close yesterday’s trading session at $81.45.
WLL’s POWR Ratings reflects this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system.
WLL is rated A in Momentum and B in Growth and Quality. It is ranked #2 of 14 stocks in the Energy – Drilling industry.
To see additional POWR Ratings for Value, Stability, and Sentiment for WLL, click here.
MRO shares were trading at $24.82 per share on Tuesday morning, down $0.47 (-1.86%). Year-to-date, MRO has gained 51.66%, versus a -3.21% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal’s passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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