Friday, June 9, 2023
  • Submit news
  • Contact
  • DMCA
  • Cookie Privacy
  • Privacy Policy
  • Terms of Use
Oil Market News
  • Home
  • Marketdaily
  • Price
  • crudenow
  • Companies
  • politics
  • Gas
  • investing
  • Stock
  • OPEChot
  • brend
  • ships
Oil Market News
Home Companies

Oil Is Surging: These 3 Stocks Would Be Big Winners in an Oil Boom

1 year ago
in Companies
Oil Is Surging: These 3 Stocks Would Be Big Winners in an Oil Boom
Share on FacebookShare on Twitter


Oil prices have been on fire this year, surging by more than 25% and recently topping $60 a barrel. This year’s surge has pushed crude oil pricing back above its pre-pandemic levels. Meanwhile, oil’s run might not be done since OPEC and other producers are keeping a tight lid on supplies at a time when demand is starting to recover. 

Given this backdrop, we asked some of our energy contributors which oil stocks they believe are best positioned to benefit if oil prices continue booming. They see some of the sector’s best upside potential in contract driller Helmerich & Payne (NYSE:HP), oil and gas producer Devon Energy (NYSE:DVN), and equipment maker Caterpillar (NYSE:CAT). Here’s why.

An oil pump with the sun bursting behind it.

Image source: Getty Images.

The right tools 

Reuben Gregg Brewer (Helmerich & Payne): Energy services get roughed up when oil falls because their customers pull back on spending. But when prices start heading higher the trend goes the other direction. Which is why Helmerich & Payne should benefit if oil prices take off (even more than they have already). The company has a couple of important things going for it.

Latest Oil News

New study shows huge variation in how different oil companies manage climate

New study shows huge variation in how different oil companies manage climate

February 1, 2023
Eni Boosts Gas Production In Libya With $8 Billion Investment

Eni Boosts Gas Production In Libya With $8 Billion Investment

January 31, 2023
Can Colombia Really Replace Oil And Gas Revenue?

Can Colombia Really Replace Oil And Gas Revenue?

January 30, 2023
Oil And Gas In For Turbulent Year As Governments And Industry Butt Heads

Oil And Gas In For Turbulent Year As Governments And Industry Butt Heads

January 29, 2023

First, it has a really strong balance sheet, with a debt-to-equity ratio of just 15%, and ample liquidity, roughly $1.3 billion. In other words, it has the financial strength to muddle through today’s hard times and also the cash to take advantage of the next upturn. That means it can pivot back to growth as soon as demand picks up again.   

HP Debt to Equity Ratio Chart

HP Debt to Equity Ratio data by YCharts

Which brings up point No. 2: It has a large fleet of high-end drilling rigs. Simply put, the best rigs will get put back to work first. To put a number on that, only 80 of its 234 high-end rigs are currently contracted out, leaving a lot of upside potential. It is worth noting, too, that Helmerich & Payne’s primary market is the U.S. fracking sector, which can ramp up production relatively quickly compared to other drilling methods.  

So, Helmerich & Payne has the strength to survive until demand picks up, the rigs that will most likely get put back to work first, and operates in a market that should be able to ramp up quickly. That sounds like a winning combination.

A gusher of dividends at higher crude prices

Matt DiLallo (Devon Energy): Oil producers have a lousy track record of creating value for shareholders when oil prices are booming. They’ve usually wasted the cash flow generated at higher oil prices on drilling new wells or buying back their stock, only to have the next oil market bust incinerate that capital.  

However, this year’s oil market recovery might be different. U.S. producers have promised not to ramp up their drilling programs as oil prices rise. On top of that, oil companies are starting to get creative in how they return cash to their shareholders. Devon Energy is leading that charge by launching an industry-first variable dividend program. The oil producer aims to pay out up to 50% of its excess cash each quarter after funding its sustainable base dividend and maintenance capital program.

Devon’s first variable dividend was a gusher at $0.19 per share ($128 million in total), more than double its base quarterly payout of $0.11 per share ($42 million). That payment is likely only a small taste of the variable dividend’s potential since Devon’s free cash flow rises with oil prices. For example, at $50 oil, Devon could produce more than $1 billion in free cash flow this year. Meanwhile, at the current oil price of more than $60 a barrel, Devon’s free cash flow would approach $1.75 billion in 2021. With as much as half of those funds going back to shareholders via its variable dividend program, Devon could be a winning investment this year on booming oil prices.   

A drilling rig with the sun setting in the background.

Image source: Getty Images.

Neha Chamaria (Caterpillar): While my colleagues have prudently picked out oil and gas stocks that should be major beneficiaries from any rise in the price of oil, I’ll deviate and recommend a company that doesn’t quite belong to the sector but has significant stake in it nonetheless: Caterpillar.

Although Caterpillar is better known for its construction and mining equipment, oil price should matter to the company more than ever now given its increasing exposure to the sector. To put a number to that, consider that energy and transportation (E&T) toppled construction industries to emerge as Caterpillar’s largest segment in 2020, accounting for nearly 42%  of its total revenue. Sales from the segment, though, declined 21% in the year, dragged largely by a depressed oil and gas market. Oil and gas has been the largest end market for E&T in recent years.

That Caterpillar sees value in the energy markets is further evidenced by its latest acquisition — that of the oil and gas division from The Weir Group for roughly $375 million. Oil’s rebound should help Caterpillar unlock greater value from the acquisition even as higher prices encourage energy companies to revive their capital spending plans and spur demand for equipment like the reciprocating engines Caterpillar specializes in.

Surging oil, therefore, could be a shot in the arm for E&T and play an important role in the revival of Caterpillar’s sales and profits going forward. To back up my argument, I’ll leave you with a chart that shows how Caterpillar’s stock price performance may not have mirrored but has moved pretty much in tandem with WTI crude oil price movement in recent years, reflecting the strong correlation between the two. 

WTI Crude Oil Spot Price Chart

WTI Crude Oil Spot Price data by YCharts





www.fool.com

Tags: BigBoomoilStocksSurgingWinners
Previous Post

Vermilion Energy Inc. Announces CEO Departure and the Appointments of Executive

Next Post

Ivanka Trump Thinks Her “Political Reemergence” Is Just Around the Corner

Related Posts

New study shows huge variation in how different oil companies manage climate

New study shows huge variation in how different oil companies manage climate

by Oil Market News
February 1, 2023
0

By Jon Goldstein and Ben HmielFor the last several years, researchers have been studying methane emissions in the Permian Basin...

Eni Boosts Gas Production In Libya With $8 Billion Investment

Eni Boosts Gas Production In Libya With $8 Billion Investment

by Oil Market News
January 31, 2023
0

Given that Libya has exhibited all the stability of a puff adder on benzedrine since the West removed its longstanding...

Can Colombia Really Replace Oil And Gas Revenue?

Can Colombia Really Replace Oil And Gas Revenue?

by Oil Market News
January 30, 2023
0

Colombia’s new President, Gustavo Petro, wants to move the South American country away from fossil fuels and replace oil revenues...

Oil And Gas In For Turbulent Year As Governments And Industry Butt Heads

Oil And Gas In For Turbulent Year As Governments And Industry Butt Heads

by Oil Market News
January 29, 2023
0

Windfall taxes, price caps, and calls for more oil and gas production marked 2022 in oil and gas. It looks...

New tech could unleash NM’s clean geothermal energy potential

New tech could unleash NM’s clean geothermal energy potential

by Oil Market News
January 28, 2023
0

Canadian company Eavor Inc. has designed a new closed-loop system to tap geothermal energy in deep-underground hot-rock formations. Eavor applies...

Bob Simpson’s TXO Energy goes public, soars 10% on first trading day

Bob Simpson’s TXO Energy goes public, soars 10% on first trading day

by Oil Market News
January 27, 2023
0

Veteran oilman Bob Simpson ushered a new venture to the New York Stock Exchange Friday when Fort Worth-based TXO Energy...

Next Post
Ivanka Trump Thinks Her “Political Reemergence” Is Just Around the Corner

Ivanka Trump Thinks Her “Political Reemergence” Is Just Around the Corner

Subscribe
Notify of
guest
guest
0 Comments
Inline Feedbacks
View all comments

Trend Oil News

Crude Oil Shielded From Bond and Stock Market Rout

Push for post-Brexit trade deals may threaten UK pledges on deforestation |

11 months ago
Oil revenue in Kuwait seen to exceed $81.25bln in fiscal ’22-’23

Oil revenue in Kuwait seen to exceed $81.25bln in fiscal ’22-’23

4 months ago
InPlay Oil Corp. Confirms Monthly Dividend for February 2023

InPlay Oil Corp. Confirms Monthly Dividend for February 2023

4 months ago
Oil hits highest in a year on growth hopes, OPEC+ cuts

Oil hits highest in a year on growth hopes, OPEC+ cuts

1 year ago
Five things to watch in Alaska’s legislative session

Five things to watch in Alaska’s legislative session

5 months ago
ADVERTISEMENT
UK set to introduce floor for oil and gas windfall tax

UK set to introduce floor for oil and gas windfall tax

June 9, 2023

Canadian refiner Irving Oil explores options including sale

June 8, 2023

UK watchdog bans Shell, Repsol and Petronas greenwashing ads

June 7, 2023

Opec+ is not on board with Saudi’s ‘whatever it takes’ message

June 6, 2023

Saudi Arabia seeks to boost oil price with output cut of 1mn barrels a day

June 5, 2023

Opec bans prominent media groups from Vienna meeting

June 4, 2023

Crude Oil

4 Days from Deadline, EU Fails To Agree On Russian Oil Products Price Cap

4 Days from Deadline, EU Fails To Agree On Russian Oil Products Price Cap

February 1, 2023
Oil rises after U.S. fuel stocks draw down; economic concerns loom

Oil prices settle steady on higher U.S. demand, weaker dollar

January 31, 2023
S&P 500 Down 1%; Crude Oil Drops Over 2%

S&P 500 Down 1%; Crude Oil Drops Over 2%

January 30, 2023
Russia Can’t Replace the Energy Market Putin Broke

Russia Can’t Replace the Energy Market Putin Broke

January 29, 2023

Investing

Orbital Sidekick Raises $10M Investment to Monitor Oil and Gas Industry from Space 

Orbital Sidekick Raises $10M Investment to Monitor Oil and Gas Industry from Space 

February 1, 2023
Crude Oil Shielded From Bond and Stock Market Rout

Clean-energy investing poised to top money backing oil and gas after hitting a record

January 31, 2023
Crude Oil Shielded From Bond and Stock Market Rout

The Cushing® MLP & Infrastructure Total Return Fund Announces Fund Name Change

January 30, 2023
Boeing’s 747, the original jumbo jet, prepares for final send-off By Reuters

Boeing’s 747, the original jumbo jet, prepares for final send-off By Reuters

January 29, 2023

Market

UK set to introduce floor for oil and gas windfall tax

UK set to introduce floor for oil and gas windfall tax

June 9, 2023
Canadian refiner Irving Oil explores options including sale

Canadian refiner Irving Oil explores options including sale

June 8, 2023
UK watchdog bans Shell, Repsol and Petronas greenwashing ads

UK watchdog bans Shell, Repsol and Petronas greenwashing ads

June 7, 2023
Opec+ is not on board with Saudi’s ‘whatever it takes’ message

Opec+ is not on board with Saudi’s ‘whatever it takes’ message

June 6, 2023

OPEC

US Close- Fed signals more hikes coming, Powell says disinflation process begun, ADP

US Close- Fed signals more hikes coming, Powell says disinflation process begun, ADP

February 1, 2023
‘OPEC does not control the price’: OPEC President | OPEC News

‘OPEC does not control the price’: OPEC President | OPEC News

January 31, 2023
OPEC+ Closely Watches Chinese Factory Data

OPEC+ Closely Watches Chinese Factory Data

January 30, 2023
Week Ahead: FOMC, BOE, ECB, OPEC, NFP and Big Tech Earnings

Week Ahead: FOMC, BOE, ECB, OPEC, NFP and Big Tech Earnings

January 29, 2023
  • Submit news
  • Contact
  • DMCA
  • Cookie Privacy
  • Privacy Policy
  • Terms of Use

© 2022 OilMarket.News

No Result
View All Result
  • Home
  • Market
  • Price
  • crude
  • Companies
  • politics
  • Gas
  • investing
  • Stock
  • OPEC
  • brend
  • ships

© 2022 OilMarket.News

wpDiscuz
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.