The global benchmark Brent crude averaged nearly $98 per barrel in the first quarter of 2022, up about $18 from the last three months of 2021. Brent hit $139 per barrel last month, its highest level since 2008, amid the Russia-Ukraine war, which is creating a global energy crunch. The rising prices bode well for oil and gas companies. Furthermore, oil prices rose on Thursday, fueled by concerns about tightened supply as the European Union (EU) mulls a potential ban on Russian oil imports, while OPEC+ is struggling to meet its production targets and U.S. crude stockpiles saw a decline in the week ended April 15.
Chevron Corporation (CVX) stock has gained 40.3% in price year-to-date, driven by rallying oil and gas prices. The stock has gained 60.2% over the past year. It has a market cap of $323.38 billion. However, RBC Capital Markets analysts downgraded CVX to sector perform from outperform, arguing that the current valuation leaves less room for a positive surprise, and that there’s a risk to its Tengiz volumes in Kazakhstan.
Given this backdrop, we think mega-cap oil and gas stocks Exxon Mobil Corporation (XOM), ConocoPhillips (COP), and Shell plc (SHEL) could be better bets than CVX now.
Exxon Mobil Corporation (XOM)
With a market capitalization of $368.45 billion, XOM in Irving, Tex., explores for and produces crude oil and natural gas in the United States and internationally. It operates through Upstream; Downstream; and Chemical segments.
On April 14, XOM undertook front-end engineering design studies and collaborated with the local emissions-intensive industries to determine the potential for carbon capture and storage to reduce greenhouse gas emissions in the Gippsland Basin. The project is expected to be operational by 2025 and could capture up to 2 million metric tons of CO2 per year. This is aligned with the company’s commitment to emission reduction.
XOM introduced Exceed™ S performance polyethylene (PE) resins, which can deliver industry-leading performance with easy processing, and the right combination of stiffness and toughness. With the company’s latest innovations in polymer science, this new product is expected to enhance customer experience by simplifying operations, enhancing efficiency, and improving package durability.
XOM’s total revenues and other income increased 82.6% from the prior-year quarter to $84.97 billion in its fiscal fourth quarter, ended Dec.31, 2021. Its net income attributable to XOM came in at $8.87 billion for the quarter, reflecting a 144.2% increase year-over-year, while its EPS stood at $2.08, up 144.3% year-over-year.
The $2.23 consensus EPS estimate for its fiscal first quarter ended March 31, 2022, represents a 242.9% improvement year-over-year. The $83.57 billion consensus revenue estimate for the same quarter represents a 41.3% increase from the same period last year. It has an impressive earnings surprise history; it topped the Street’s EPS estimates in each of the trailing four quarters.
XOM has gained 55.4% in price over the past year and 42.2% year-to-date to close the last trading session at $87.03.
XOM’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, translating to Buy in our POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
XOM has an A grade in Momentum and a B in Growth and Quality. It is ranked #35 of 96 stocks in the B-rated Energy – Oil & Gas industry.
Beyond what is stated above, we have also rated XOM for Value, Stability, and Sentiment. Get all the XOM ratings here.
ConocoPhillips (COP)
COP is an independent exploration and production company in Houston, tex., that explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids. It operates through six geographical segments: Alaska; Lower 48; Canada; Europe, Middle East, and North Africa; Asia-Pacific; and Other International. The company has a market cap of $127.88 billion.
On March 3, 2022, COP announced the completion of the sale of its subsidiary that indirectly owns its 54% interest in the Indonesia Corridor Block Production Sharing Contract (PSC) and a 35% interest in the Transasia Pipeline Company to MedcoEnergi for $1.355 billion. “This disposition is part of our ongoing effort to focus our investments across low cost of supply opportunities,” said Ryan Lance, ConocoPhillips chairman, and chief executive officer.
In February, the company announced the purchase of an additional 10% interest in Australia Pacific LNG from Origin Energy for $1.645 billion. This strategic acquisition is expected to diversify the company’s product mix while lowering its aggregate decline rate.
COP’s total revenues and other income increased 163.9% year-over-year to $15.96 billion in its fiscal fourth quarter, ended Dec. 31, 2021. Its net income attributable to COP grew 440.3% from the year-ago value to $2.63 billion, while its net income per share improved 375% year-over-year to $1.98. The company’s cash, cash equivalents, and restricted cash balance was $5.40 billion, up 62.8% from the previous year’s quarter.
COP’s revenue for the quarter ended March 31, 2022, is expected to be $18.02 billion, indicating 70.6% year-over-year growth. The company’s EPS is expected to increase 344.1% year-over-year to $3.06 for the same quarter. COP also beat the consensus EPS estimates in each of the trailing four quarters.
COP’s shares have gained 97.2% in price over the past year to close the last trading session at $98.67. The stock has gained 73% in price over the past nine months.
It is no surprise that COP has an overall rating of B, which equates to Buy in our POWR Ratings system. COP has an A grade in Momentum and Sentiment and a B in Growth. It is ranked #30 in the Energy – Oil & Gas industry.
In addition to the POWR Rating grades I have just highlighted, you can see the COP’s ratings for Value, Stability, and Quality here.
Shell plc (SHEL)
Headquartered in London, SHEL operates as an energy and petrochemical company through its Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments. It has a market cap of $214.17 billion.
For its fiscal fourth quarter, SHEL’s total revenue and other income increased 100.4% year-over-year to $90.22 billion. Its income for the period grew 393.3% from its year-ago value to $11.60 billion, while its EPS came in at $1.48, up 384.6% year-over-year. The company’s cash flow from operating activities stood at $8.17 billion, reflecting a 30% increase year-over-year.
The Street expects SHEL’s EPS for its fiscal year ending Dec. 31, 2022, to improve 82.5% year-over-year to $9.09. The $385.01 billion consensus revenue estimate for the same period represents a 47.2% increase year-over-year.
SHEL has gained 46.8% in price over the past year and 47.4% over the past nine months to close the last trading session at $56.71.
SHEL’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The company has an A grade in Momentum and a B in Sentiment. The stock is ranked #23 in the Energy – Oil & Gas industry.
To get SHEL’s ratings for Growth, Quality, Stability, and Value, click here.
XOM shares were trading at $86.83 per share on Friday morning, down $0.20 (-0.23%). Year-to-date, XOM has gained 43.48%, versus a -8.59% rise in the benchmark S&P 500 index during the same period.
About the Author: Komal Bhattar
Komal's passion for the stock market and financial analysis led her to pursue investment research as a career. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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