Oil prices have been fluctuating since Russia’s invasion of Ukraine, as Western countries have rushed to impose a plethora of economic sanctions, including a U.S. import embargo on Russian oil. Because Russia is the second-largest global exporter of oil, these sanctions have caused crude oil to experience wild price swings.
In order to offset rising energy costs, the Biden administration last week announced the release of 1 million barrels of oil per day from the nation’s strategic reserves. The U.S. Energy Information Administration expects the increased supply to lower the oil prices by as much as 50%. Following this news, benchmark crude oil futures dipped 4%. However, in the wake of increased war crimes allegedly committed by Russia in Ukraine, and Russia’s demand for oil payment in rubles, many European countries are exploring a potential oil import ban of their own. This could cause crude oil prices to spike again.
Given this backdrop, we think fundamentally strong energy stocks YPF Sociedad Anónima (YPF), TransGlobe Energy Corporation (TGA), and Martin Midstream Partners L.P. (MMLP), which are currently trading below $6, could be wise bets.
YPF Sociedad Anónima (YPF)
Headquartered in Argentina, YPF is an energy company that operates through three segments: Exploration and Production; Downstream; and Corporate and Other. In addition, the company owns and operates three refineries with a combined annual refining capacity of approximately 116 mmbbl; about 2,800 kilometers of crude oil pipelines; crude oil tankage of around seven mmbbl, and maintains terminal facilities at five Argentine ports. It is the largest company in Argentina in terms of revenue.
YPF’s revenue increased 59.5% year-over-year to $3.62 billion in its fiscal fourth quarter (ended Dec. 31, 2021). Its adjusted EBITDA grew 355.7% from its year-ago value to $834 million, while its gross profit increased 212.9% year-over-year to $607 million over the period. The company’s cash and cash equivalents stood at $1.11 billion, representing an 11.5% increase year-over-year.
Analysts expect YPF’s revenues to increase 48.1% year-over-year to $3.92 billion in its fiscal first quarter (ended March 31, 2022). And its EPS is expected to increase 1,250% to $0.69 in the last quarter.
Shares of YPF have gained 39% in price year to date to close the last trading session at $5.31.
YPF’s POWR Ratings reflect this promising outlook. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
YPF has an A grade for Momentum and a B grade for Growth, Value, and Quality. Within the A-rated Foreign Oil & Gas industry, it is ranked #10 of 42 stocks.
To see additional POWR Ratings for Stability and Sentiment for YPF, click here.
TransGlobe Energy Corporation (TGA)
Headquartered in Calgary, Canada, TGA is a holding company that is engaged in oil exploration, development, production, and acquiring properties in Egypt and Canada. It holds interests in four production sharing concessions: West Gharib, West Bakr, NW Gharib, and South Ghazalat, and also owns an approximately 100% working interest in Harmattan property.
On March 16, TGA announced that its board of directors had declared a cash dividend of $0.10 per common share, which is expected to be paid on May 12, 2022.
On January 27, TGA announced its 2022 capital budget of $57.7 million (before capitalized G&A). This program should maximize TGA's cash flows and fuel future growth opportunities.
And on January 20, the company announced the execution of its Eastern Desert agreement. “This Agreement with the Egyptian General Petroleum Corporation resets the TransGlobe business in Egypt; not only does it give us the added time to exploit the existing producing fields to their maximum potential, including the pursuit of identified contingent resources, the improved fiscal terms incentivize TransGlobe to continue to invest across our Eastern Desert portfolio,” stated Randy Neely, president and CEO of TGA.
TGA's petroleum and natural gas sales increased 83% year-over-year to $93.43 million in its fiscal year 2021 fourth quarter, ended Dec. 31, 2021. TGA’s net earnings improved 330% year-over-year to $6.56 million, while its funds flow from operations grew 112% year-over-year to $15.27 million. The company’s earnings per share rose 325% year-over-year to $0.09.
TGA’s revenue is expected to increase 101.2% year-over-year to $340 million for its fiscal year 2022. Over the past year, the stock has gained 140.4% in price to close the last trading session at $3.87.
TGA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. TGA also has an A grade for Momentum and a B grade for Value, Sentiment, and Quality. The stock is ranked #3 of 42 stocks in the Foreign Oil & Gas industry.
In addition to the POWR Ratings I have just highlighted, click here to see the TGA ratings for Growth and Stability.
Martin Midstream Partners L.P. (MMLP)
MMLP in Kilgore, Tex., provides services to independent oil and gas companies, refiners, and chemical companies in the United States Gulf Coast region. It operates through four segments: Terminalling and Storage; Natural Gas liquids; Transportation; and Sulfur services. In addition, the company owns approximately 15 marine shore-based terminal facilities and 13 specialty terminal facilities in the Gulf Coast region.
On March 15, MMLP announced an offer to purchase up to $9.3 million worth of its outstanding senior secured notes due 2025. This redemption should enable MMLP to deleverage and reduce its interest obligations.
On January 25, MMLP declared a quarterly cash distribution of $0.005 per unit for the fourth quarter, which was paid to common unitholders on Feb. 7, 2022.
During the fourth quarter, ended Dec. 31, 2021, MMLP’s adjusted EBITDA increased 128.2% year-over-year to $39.66 million. Its net income improved 521.3% from its year-ago value to $10.8 million. And the company’s total revenue for fiscal 2021 (ended December 31) grew 31.3% year-over-year to $ 882.43 million.
The $0.28 consensus EPS estimate for its fiscal first quarter (ended March 31, 2022) represents a 366.7% improvement year-over-year. The $43.21 million consensus revenue estimate for the past quarter indicates a 26.6% increase from the same period last year. It surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of MMLP have gained 77.1% in price over the past year to close yesterday’s trading session at $4.25.
MMLP’s POWR Ratings reflect solid prospects. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system. It has a B grade for Value, Sentiment, Momentum, and Quality. It is ranked #1 out of 36 stocks within the A-rated MLPs - Oil & Gas industry.
Click here to see the MMLP ratings for Growth and Stability.
What To Do Next?
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YPF shares were trading at $5.22 per share on Tuesday afternoon, down $0.09 (-1.69%). Year-to-date, YPF has gained 36.65%, versus a -4.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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