Energy stocks have soared this year, thanks mainly to the surge in demand that followed the end of the virus. Because oil is priced in dollars, this respite meant the US currency steadily increased, which meant higher oil costs.
When one adds in OPEC’s hesitation to supply more oil to the market, we have a very crazy scenario. In January 2021, the average petrol price was $2.40 per gallon. The average gas price on December 3, 2021, was $3.37 per gallon. That’s a significant increase in a short amount of time. Below are some great picks you should consider.
Flex LNG (FLNG)
Global demand for liquefied natural gas (LNG) is increasing. The United States possesses some of the world’s richest natural gas deposits, and Japan and Europe are paying natural gas prices that are multiples of those in the United States.
For LNG shipping businesses like FLNG, this presents a significant revenue potential. Russia’s natural gas pipeline into Europe is still holding Europe hostage, and European governments are quickly exploring alternatives. FLNG boasts one of the world’s most contemporary fleets, with fifth-generation ships capable of carrying more cargo than prior LNG fleets.
For US natural gas and LNG shipping businesses, this is a big long-term opportunity. Despite its 140 percent year-to-date gain, FLNG is still a modest firm with a market worth of $1.2 billion. It also pays a large yield of over 14%, although it is highly volatile. Get this for the sake of development. This stock has an ‘A’ rating on our list.
Callon Petroleum (CPE)
There are many more businesses in the energy sector than one might think. Most of the downstream names where we fill up our automobiles are familiar to us. Long before we insert a pump in our tank, however, there is a slew of other firms concerned.
Exploration and production (E&P) businesses that discover and extract natural gas and oil from the ground are many. One of them is CPE. This has been in operation since 1950. This implies it’s been through a lot of challenges and has developed a business strategy that can survive the swings in the energy markets.
CPE is a stock with a market capitalization of slightly under $3 billion that is recovering from pandemic lows. E&P firms are more reliant on oil price fluctuations than midstream and downstream companies. Once prices fall, they are heavily hit, but when prices rise, they skyrocket. CPE stock has climbed 290 percent year to date, and there is still room for additional gains. This stock has an ‘A’ rating on our list.
Magnolia Oil & Gas (MGY)
MGY is a comparative newcomer to the E&P market, with operations in the Eagle Ford Shale and other locations in South Texas. It has a market valuation of over $4 billion, which is impressive for such a fresh firm (established in 2018).
It’s already lucrative, even in these difficult times for US E&P companies. However, Eagle Ford is a highly busy location these days, and as energy consumption rises, demand for energy stocks like MGY will rise as well.
MGY stock has gained 178 percent year to date, but it currently sells at a price-to-earnings ratio of only 11x. The reality that it has positive earnings this early in the life cycle is a significant accomplishment that not all of its rivals can boast about. Its meteoric rise should continue to pay off in the long run. This stock has an ‘A’ rating on our list.
Imperial Oil (IMO)
IMO has been a big factor in Canada’s energy markets since 1880. It is Canada’s second-largest oil business, with a market capitalization of $23 billion. Exxon Mobil (NYSE: XOM) now owns a 70% share in IMO.
This implies investors can have an implicit stake in one of the world’s largest integrated oil businesses while simultaneously benefiting from a leading Canadian energy company. From exploration and production to pipelines, refineries, and retail operations, integrated energy firms are fully integrated. They don’t have the same rapid growth as specialized players, but they are more stable.
The stock of IMO has increased 84 percent so far this year, but profits will keep rising as demand grows. It also pays a dividend of 2.3 percent. This stock has an ‘A’ rating on our list.
Marathon Oil (MRO)
MRO is one of the world’s largest independent E&P companies, with a market valuation of about $12 billion.
The majority of its activities are in the shale areas of the United States, although it also has operations in Equatorial Guinea. There are strong indications that the latter has some exciting, unexplored prospects, and MRO is in a unique position to help develop those opportunities.
MRO’s origins can be traced back to the late 1800s when John D. Rockefeller was establishing Standard Oil. However, MRO’s longevity demonstrates that it has been through a lot and come out stronger as a result.
MRO’s stock has been up 140 percent so far this year, and its profits are just starting to improve. MRO will be the benchmark of the group if E&Ps are strong energy stocks. This stock has an ‘A’ rating on our list
Notable Mention: Matador Resources (MTDR)
MTDR is one of the more intriguing energy stocks available considering it is neither an E&P nor an integrated oil. It has certain midstream assets as well as E&P operations.
Pipeline activities are the foundation of midstream companies. Pipelines also generate money based on demand rather than pricing. This implies they get compensated based on the amount of material that passes through their pipes rather than the cost of electricity. Because it runs its pipelines and has far more influence over midstream pricing than a third party, this helps make its upstream activities viable.
The stock has a market cap of $4.4 billion and is up 220 percent year to date. Despite this, it is currently trading at a P/E of 16x. This stock’s tank — and its pipelines — have plenty of gas remaining in them.
Disclaimer: The Zumm Staff member who was largely responsible for this content did not own any holdings in the securities discussed in the article whether directly or indirectly.