Investors are edgy about a U.S. interest rate hike later this month which is weighing down on oil prices. Moreover, recession fears are causing prices to drop despite a fall in crude exports from Russia and supply disruptions in Libya. Oil prices tumbled below the $100 mark.
Although oil demand has curbed a bit, the International Energy Agency (IEA) expects strong power generation use and recovery in China to provide an offset. Global oil demand is projected to rise by 1.7 mb/d in 2022, reaching 99.2 mb/d.
Moreover, according to Truist Financial Corp. (TFC) analyst Neal Dingmann, oil prices could top $150 per barrel if Russian crude cannot be replaced, as there is almost no spare capacity among OPEC+ members or the United States to produce more oil.
Moreover, oil seems to enjoy favorable investor sentiment, as evident from The United States Oil Fund, LP’s (USO) 34.6% gains year-to-date versus the S&P 500’s 20.2% declines over the same period.
Chevron Corporation (CVX)
CVX is an integrated energy and chemicals company operating worldwide. The company operates in two segments: Upstream, exploring, developing, producing, and transporting crude oil and natural gas; and Downstream, which engages in refining crude oil into petroleum products.
On June 14, CVX announced that it had completed its acquisition of Renewable Energy Group (REGI). The acquisition is expected to increase the company’s portfolio to include an expanded suite of cost-effective, lower-carbon solutions.
In June, CVX subsidiary Chevron Munaigas Inc. and JSC NC KazMunayGas (KMG) announced that they had signed a memorandum of understanding to explore potential lower carbon business opportunities in Kazakhstan. This might benefit the company.
CVX’s total revenues and other income increased 69.8% year-over-year to $54.37 billion in the first quarter ended March 31. Its net cash provided by operating activities grew 92.9% from the year-ago value to $8.10 billion, while its net income improved 349% year-over-year to $6.28 billion.
The company’s net income attributable to CVX per share of common stock increased 347.2% from its year-ago value to $3.22.
The consensus EPS estimate of $4.94 for the second fiscal quarter (ended June 2022) indicates a 189% improvement year-over-year. The consensus revenue is expected to be $57.69 billion for the same period, indicating a growth of 53.5% year-over-year.
The stock has gained 32.8% over the past year and 17.6% year-to-date to close its last trading session at $137.99.
CVX’s POWR Ratings reflect this promising outlook. The stock is rated an A in Momentum and a B in Growth and Quality. Within the B-rated Energy – Oil & Gas industry, it is ranked #52 out of 97 stocks. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
To see additional POWR Ratings for Value, Stability, and Sentiment for CVX, click here.
Marathon Oil Corporation (MRO)
MRO is an independent exploration and production company operating internationally. The company explores, produces, and sells crude oil and condensate, natural gas liquids, and natural gas. It also produces liquefied natural gas and methanol.
In April, MRO declared a dividend of eight cents per share on its common stock, which was payable to shareholders on June 10. This represents an approximate 15% increase from the company’s last quarterly base dividend payment of seven cents per share and reflects its shareholder return ability.
MRO’s total revenues and other income came in at $1.75 billion for the first quarter ended March 31, representing a 63.7% year-over-year growth. Its income from operations grew 588% from the prior-year quarter to $805 million, while its adjusted net income rose 351.2% from the same period last year to $749 million.
The Adjusted net income per share increased 385.7% from the prior-year period to $1.02.
Analysts expect MRO’s revenue for the second quarter that ended June 2022 to be $2.07 billion, indicating an 81.5% year-over-year growth. The company’s EPS for the same quarter is expected to increase 461.3% from the prior-year quarter to $1.23. Additionally, MRO has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
MRO has gained 58.1% over the past year and 26.3% year-to-date to close its last trading session at $20.74.
It is no surprise that MRO has an overall B rating, which translates to Buy in our POWR Rating system. MRO has an A grade for Momentum and Quality. It is ranked #19 in the Energy – Oil & Gas industry.
Beyond what we’ve stated above, we have also given MRO grades for Growth, Value, Stability, and Sentiment. Get all the MRO ratings here.
Cheniere Energy, Inc. (LNG)
LNG is an energy infrastructure company engaged in U.S. liquefied natural gas-related businesses. The company operates the Sabine Pass LNG terminal in Cameron Parish, Louisiana, and the Corpus Christi LNG terminal near Corpus Christi, Texas.
In June, LNG announced that two of its subsidiaries had entered into long-term liquefied natural gas sales and purchase agreements with CVX subsidiary Chevron U.S.A. Inc. “These long-term SPAs underscore the growing demand for reliable, cleaner burning LNG supply beyond 2040 and further support investment in additional LNG capacity beyond our Corpus Christi Stage III Project.”, said Anatol Feygin, LNG’s Executive Vice President and Chief Commercial Officer.
In the same month, LNG announced that it had entered into a Purchase Agreement to repurchase approximately $350 million of its common shares beneficially owned by Carl C. Icahn or Icahn Enterprises L.P (IEP). This reflects upon the efficient execution of the company’s long-term capital allocation plan.
For the first quarter that ended March 31, LNG’s total revenues increased 142.2% year-over-year to $7.48 billion. This can be attributed to a rise of 144.7% from the prior-year period in liquefied natural gas revenues to $7.34 billion. Its consolidated adjusted EBITDA rose 117.1% from the same period last year to $3.15 billion.
Street EPS estimate for the fiscal second quarter (ended June 2022) of $3.01 reflects a rise of 4,020.6% year-over-year. Likewise, Street revenue estimate for the same quarter of $6.06 billion indicates an improvement of 100.8% from the prior-year period.
Over the past year, LNG’s stock has gained 45.9% and 20.7% year-to-date to close its last trading session at $122.39.
LNG has an overall B rating, equating to Buy in our POWR Ratings system. It has an A grade for Momentum. It is ranked #28 in the same industry.
Click here to see the additional POWR Ratings for LNG (Growth, Value, Stability, Sentiment, and Quality).
CVX shares were trading at $134.65 per share on Thursday afternoon, down $3.34 (-2.42%). Year-to-date, CVX has gained 16.90%, versus a -20.38% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More…