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Top Oil & Gas Stocks for Q2 2023
Top Oil & Gas Stocks for Q2 2023
6 minute read
Top performing oil and gas stocks in the past one year include TORM Plc, Tekay Tankers and Scorpio Tankers. Despite oil prices falling significantly from their peaks recorded nearly a year ago, these companies have seen their shares rise more than 100% over the past year, easily outpacing the Russell 1000 index's 9% decline. Have done.
Oil and gas stocks as a group, as measured by the benchmark Energy Select Sector SPDR ETF (XLE), have climbed 10% over the past year, outperforming the broad market. However, a fall in oil and gas prices in the second half of 2022 and 2023 could put pressure on margins and revenues in the sector.
Below, we examine the top oil and gas stocks in three categories: best value, fastest growth, and most momentum, respectively. All figures are as of April 6.
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Best Value Oil & Gas Stocks
These are the oil and gas stocks with the lowest trailing 12-month price-to-earnings (P/E) ratios. A lower P/E ratio indicates that you are paying less for each dollar of profit generated. Profits can be returned to shareholders in the form of dividends and share buybacks.Best Value Oil & Gas Stocks
| Price ($) | Market Capitalization ($B) | 12-Month Trailing P/E Ratio | |
|---|---|---|---|
| Obsidian Energy Ltd. (OBE) | 6.90 | 0.6 | 1.0 |
| Vital Energy (VTLE) | 50.25 | 0.9 | 1.3 |
| SilverBow Resources Inc. (SBOW) | 24.13 | 0.5 | 1.6 |
- Obsidian Energy Limited: Obsidian Energy explores for, develops and produces petroleum resources around Alberta, Canada. On February 23, the company released its fourth quarter full year earnings. Compared to Q4 2021, net income increased by 29 times with a 38% increase in production revenue. The massive increase in net income was driven by stronger funds from operations (FFO) and higher reserve and commodity prices.
- Vital Energy: Vital Energy is an oil and natural gas exploration and development company focused on the Permian Basin in West Texas. Formerly Laredo Petroleum, Inc. The company, formerly known as , changed its name to Vital Energy in January 2023. The company's net income for the fourth quarter of 2022 is expected to decline by 45% due to weaker sales volumes and lower average natural gas prices.
- SilverBow Resources Inc.: SilverBow Resources is an oil and gas company engaged in the production of petroleum products in southern Texas.
Fastest Growing Oil and Gas Stocks
These are the top oil and gas stocks, as ranked by the growth model, which scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their Most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are important factors in the success of a company. Therefore, ranking companies by only one growth metric makes that ranking susceptible to accounting anomalies (such as changes in tax law or restructuring costs) that quarter that may make one figure unrepresentative of one or the other business in general. Companies with quarterly EPS or revenue growth greater than 1,000% were excluded as outliers.Fastest Growing Oil and Gas Stocks
| Price ($) | Market Cap ($B) | EPS Growth (%) | Revenue Growth (%) | |
|---|---|---|---|---|
| Frontline PLC (FRO) | 15.44 | 3.4 | 980 | 148 |
| Permian Basin Royalty Trust (PBT) | 26.86 | 1.3 | 371 | 354 |
| Par Pacific Holdings Inc. (PARR) | 28.38 | 1.7 | 900 | 40 |
- Frontline plc: Frontline, based in Bermuda, is a crude oil transportation company with a fleet of 70 vessels. Net income to jump 12X to $240 million in the fourth quarter of 2022 – the most since 2008 – due to rapid growth in demand and large raw material usage in China.
- Permian Basin Royalty Trust: The Permian Basin is a trust that holds interests in Texas properties that produce oil and natural gas liquids (NGL). Simmons Bank is the trustee of the Permian Basin royalties. The trust announced a March 2023 monthly cash distribution of approximately 2.4 cents per unit, which was lower than the previous month due to increased oil and gas production.
- Par Pacific Holdings Inc.: Par Pacific owns and operates energy infrastructure and retail businesses. The company manages several oil refineries in Hawaii and the Pacific Northwest and has logistics operations transporting and storing fuel between the Hawaiian Islands. Par Pacific also owns a convenience store chain called Hele's in Hawaii.
Oil and Gas Stocks with Fastest Growth
These are the oil and gas stocks that had the highest total returns over the past 12 months. Companies with total returns greater than 1,000% were excluded as outliers.Oil and Gas Stocks with Fastest Growth
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
|---|---|---|---|
| TORM PLC (TRMD) | 29.45 | 2.4 | 284 |
| Teekay Tankers Ltd. (TNK) | 40.22 | 1.4 | 182 |
| Scorpio Tankers Inc. (STNG) | 55.50 | 3.3 | 168 |
| Russell 1000 Index | N/A | N/A | -9 |
| Energy Select Sector SPDR ETF (XLE) | N/A | N/A | 10 |
- TORM PLC: TORM, based in the UK, is a pure-play tanker company that transports petroleum products around the world.
- Teekay Tankers Ltd.: Teekay Tankers is a marine transport and logistics company based in Bermuda with a fleet of 50 tankers. Revenue in the fourth quarter of 2022 doubles from the prior year due to historically high tanker rates. Net income was $146 million compared to a loss of $40 million a year earlier.
- Scorpio Tankers Inc: Scorpio Tankers is a Monaco-based shipping company that transports petroleum products. It currently owns or has on lease 113 tankers.
Benefits of Oil and Gas Stocks
Inflation/Interest Rates Hedge: Historically, rising inflation has been correlated with higher oil prices, providing investors with a potential portfolio hedge by investing in oil and gas stocks. Typically, the Federal Reserve raises interest rates to combat inflation with the aim of reducing consumer demand. Over the past six rate-tightening cycles, the price of West Texas Intermediate (WTI) crude contracts has risen an average of 16.06% in the six months following each rate hike, according to Path Trading Partners co-founder Bob Iaccino.
Tax Benefits: Investing in oil and gas stocks offers investors and producers a number of unique tax benefits. Some of the key advantages include a favorable way to treat active and passive income and reductions in certain drilling and lease costs. For example, the Internal Revenue Service (IRS) tax code considers earnings from oil and gas as passive income while the tax code considers earnings from royalties as passive income while classifying net losses as active income. This may enable some investors to offset their production revenue losses with other forms of income, such as capital gains.
Risks of Oil and Gas Stocks
Tightening government regulations: Oil and gas stocks face increasing challenges from environmental regulations as governments set goals to reduce carbon emissions and continue to encourage the transition from fossil fuels to renewable energy sources. Sector stocks already have high capital expenditure (CapEx); Therefore, adding additional costs to meet climate goals drains cash reserves, especially if energy prices begin to fall.Price volatility: Oil and gas stocks are prone to significant volatility in commodity prices, driven by supply and demand fundamentals and geopolitical events. For example, a surprise decision by members of the Organization of the Petroleum Exporting Countries (OPEC) to increase production can cause a sharp drop in oil prices. Conversely, the outbreak of war could lead to an increase in energy prices. For example, due to Russia's position as the world's largest gas exporter, natural gas prices increased by about 75% in the first half of 2022 following Russia's invasion of Ukraine.
