The energy sector has been in focus since the start of the Russia-Ukraine conflict. Furthermore, oil prices began climbing again this week. Brent crude oil estimates for July stand at $114.24/barrel, indicating a 2.4% gain. In addition, according to AAA, the average price of a gallon of regular gas hit a record high of $4.43.
Despite a gradual uptrend in OPEC’s production rates, lingering logistical disruptions could keep oil and gas prices higher for the rest of 2022. Also, seasonal driving demand might broaden profit margins for the energy sector in the next quarter. Investors’ interest in energy stocks is evident in the Energy Select Sector SPDR ETF’s (XLE) 42.7% returns over the past six months.
Given this backdrop, we think it could be wise to add fundamentally strong energy stocks Cenovus Energy Inc. (CVE), Talos Energy Inc. (TALO), Sabine Royalty Trust (SBR), CVR Energy, Inc. (CVI), and Marathon Oil Corporation (MRO) to one’s watchlist now.
Cenovus Energy Inc. (CVE)
Headquartered in Calgary, Canada, CVE, and its subsidiaries develop, produce, and market crude oil, natural gas liquids, and natural gas in Canada, the United States, and the Asia Pacific region. The company operates through Oil Sands; Conventional; Offshore; Canadian Manufacturing; U.S. Manufacturing; and Retail segments.
On April 27, 2022, Alex Pourbaix, CVE’s President & CEO, said, “After rapidly deleveraging our balance sheet, we are now able to provide a much clearer picture of how we will position Cenovus for the longer term–as a leader in delivering total shareholder returns.”
CVE’s revenues increased 74.3% year-over-year to C$16.20 billion ($12.63 billion) in the first quarter ended March 31, 2022. Its gross sales came in at C$17.38 billion ($13.56 billion), up 79.8% year-over-year. Also, its net earnings came in at C$1.63 billion ($1.27 billion), up 638.6% year-over-year, while its EPS came in at C$0.79, up 690% year-over-year.
Analysts expect CVE’s revenue to increase 33.4% year-over-year to $48.93 billion in 2022. Its EPS is estimated to grow 1,209.5% to $2.75 in 2022. Over the past year, the stock has gained 156.6% in price to close yesterday’s trading session at $20.63.
CVE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
CVE has an A grade for Momentum and a B grade for Growth, Value, and Sentiment. Within the B-rated Energy - Oil & Gas industry, it is ranked #13 out of 98 stocks. Click here to see the additional CVE ratings for Stability and Quality.
Talos Energy Inc. (TALO)
TALO in Houston, Tex., is an independent exploration and production company that focuses on exploring and producing oil and natural gas properties in the United States Gulf of Mexico and offshore Mexico. The company has reserves of around 161.59 million barrels of oil equivalent.
On May 4, 2022, President and CEO Timothy S. Duncan said, “We are excited to expand our Bayou Bend CCS project with the addition of Chevron to the partnership, which adds a significant partner committed to low-carbon investments and increases the potential impact this CCS hub can have. We are proud of our accomplishments in the quarter and hope to maintain the positive momentum for the remainder of 2022.”
TALO’s total revenues increased 54.9% year-over-year to $413.57 million for the first quarter, ended March 31, 2022. The company’s net loss was $66.44 million, compared to a $121.49 million loss in the year-ago period. Furthermore, its loss per share came in at $0.81, compared to a $1.49 loss per share in the prior-year period.
For its fiscal year 2022, analysts expect TALO’s revenue to be $1.38 billion, representing a 14% year-over-year rise. The company’s EPS is expected to increase 565% to $0.93 in the quarter ended Sept. 30, 2022. The stock has gained 93.2% in price year-to-date to close yesterday’s trading session at $18.93.
TALO’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system. TALO has an A grade for Momentum and a B grade for Value, Sentiment, and Quality. Within the Energy - Oil & Gas industry, it is ranked #8. Click here to see the additional POWR Ratings for Growth and Stability for TALO.
Sabine Royalty Trust (SBR)
SBR holds royalty and mineral interests in various producing oil and gas properties in the United States. The Dallas, Tex., company's royalty, and mineral interests include landowner's royalties, overriding royalty interests, minerals, production payments, and other similar non-participatory interests.
For the year ended Dec. 31, 2021, SBR’s royalty income increased 67.6% year-over-year to $60.90 million. Its total income came in at $60.91 million, up 67.5% year-over-year. In addition, its distributable income was $57.85 million, up 73.7% year-over-year, while its EPS came in at $3.97, up 74.1% year-over-year.
Over the past year, the stock has gained 92.2% in price to close yesterday’s trading session at $68.76.
It is no surprise that SBR has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth and Momentum. SBR is ranked #38 in the Energy - Oil & Gas industry. Click here to see SBR’s ratings for Value, Stability, Sentiment, and Quality.
CVR Energy, Inc. (CVI)
CVI in Sugar Land, Tex., and its subsidiaries engage in petroleum refining and nitrogen fertilizer manufacturing activities in the United States. It operates in two segments–Petroleum and Nitrogen Fertilizer.
On May 2, 2022, Dave Lamp, CVI’s CEO, said, “The U.S. spring crop planting season is progressing, and we expect industry conditions to remain firm for the remainder of 2022.”
CVI’s net sales came in at $2.37 billion for the first quarter, ended March 31, 2022, up 62.2% year-over-year. Its net income came in at $94 million, compared to a$39 million loss in the previous period. Also, its EPS was $0.93, compared to a $0.39 loss per share in the prior-year period. Its adjusted EBITDA increased 496.2% year-over-year to $155 million.
Analysts expect CVI’s revenue to grow 9% year-over-year to $7.89 billion in its fiscal year 2022. In addition, the company’s EPS is expected to increase 487.5% to $0.93 for the quarter ended Sept. 30, 2022. The stock has gained 92.2% in price year-to-date to close yesterday’s trading session at $32.30.
CVI has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. The stock has an A grade for Growth, Momentum, and Quality. CVI is ranked #10 in the Energy - Oil & Gas industry. Click here to see the additional POWR Ratings for Value, Stability, and Sentiment for CVI.
Marathon Oil Corporation (MRO)
MRO in Houston, Tex., operates as an independent exploration and production company in the United States and internationally. The company explores, produces, and markets crude oil and condensate, natural gas liquids and natural gas, and the production and marketing of products manufactured from natural gas.
On May 4, 2022, Chairman, President, and CEO Lee Tillman said, “We remain well positioned to continue delivering financial results and return of capital that are compelling not only relative to the best companies in energy, but relative to the best in the S&P 500.”
MRO’s total revenues and other income came in at $1.75 billion for the first quarter ended March 31, 2022, up 63.7% year-over-year. Its adjusted net income was $749 million, up 351.2% year-over-year, while its adjusted EPS came in at $1.02, up 385.7% year-over-year.
MRO’s revenue is expected to increase 33.4% to $7.30 billion in 2022. Its EPS is estimated to increase 179.5% to $1.09 for the quarter ending Sept. 30, 2022. It surpassed EPS estimates in each of the four trailing quarters. Over the past year, the stock has gained 137.1% in price to close yesterday’s session at $27.90.
MRO has an overall B rating, which equates to a Buy in our POWR Ratings system. It has an A grade for Momentum and Quality and a B grade for Sentiment. Click here to check additional Growth, Value, and Stability ratings for MRO. It is ranked #19 in the Energy - Oil & Gas industry.
CVE shares were trading at $20.97 per share on Tuesday morning, up $0.34 (+1.65%). Year-to-date, CVE has gained 71.06%, versus a -14.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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