The price of a barrel of crude oil is currently in the triple digits — a figure not seen since 2008. This is unlikely to fall soon as EU leaders have agreed to ban 90% of Russian crude by December 2022. While this is dire news for consumers, it is excellent for the companies supplying the black stuff. Keeping this in mind, here are three energy stocks that are poised to profit that you could consider investing in.
Chevron Corporation (NYSE: CVX) has benefitted hugely from the increase in oil prices. The company’s adjusted earnings per share (EPS) in Q1 2022 were almost four times higher than in Q1 2021 at $3.36 compared to $0.90. Since 2010 Chevron has doubled its dividends per share and has raised its share buyback guidance for 2022 to $10 billion from $5 billion. The dividend yield currently stands at 3.19%.
Chevron may be earning huge profits from oil, but it is also investing heavily in renewable energy. Capital expenditures on lower-carbon businesses are forecast to reach $10 billion through 2028, with $4 billion to be spent by the end of 2022. This includes completing the acquisition of Renewable Energy Group, Inc. (NASDAQ: REGI) by the middle of this year, at current estimates.
It is forecast that upstream production will grow at a compounded annual growth rate (CAGR) of >3% per annum. While this may sound low, Chevron has reduced its capital expenditure this year while global oil demand outstrips supply. This means profits may be high on this output. Chevron also uses the guidance of $60 per barrel per annum for all their forecasted income and expenditure. This is about half the current price.
Exxon Mobil Corporation
Exxon Mobil Corporation (NYSE: XOM) has recently announced that it is increasing its share repurchases up to $30 billion through 2023, representing about 7% of its market capitalization. When a company repurchases its shares, it effectively destroys them. This, in turn, reduces the number of shares available to purchase, driving up the market value. Share repurchases are a popular strategy for large companies with low future growth potential or limited investment opportunities. The strategy is particularly beneficial for shareholders in companies shunned by ESG investors, as this artificial demand holds or increases the share price even as demand from real investors falls.
Exxon Mobil’s EPS doubled from $0.64 in Q1 2021 to $1.28 in Q1 2022. However, this was a fall from $2.08 in the fourth-quarter of 2021. The company blames adverse weather conditions in Canada and maintenance projects on its facilities for the lower output and profits, and forecasts earnings to increase in the second-quarter. It is currently on track to deliver a 25% increase in production this year versus 2021’s full-year output. The company’s current dividend yield is 3.61%.
Like Chevron, Exxon Mobil is also investing in a lower-carbon future. It announced plans for its first world-scale blue hydrogen plant in Baytown, Texas. The proposed plant will produce up to one billion cubic feet per day of blue hydrogen, including one of the world’s largest carbon capture and storage projects. This will double the company’s carbon capture capacity.
BP p.l.c. (British Petroleum)
BP p.l.c. (NYSE: BP) has not had as good a year as the other stocks mentioned. In Q1 2022, BP made a loss of $20.07 billion compared to a profit of $4.9 billion a year ago, and a profit of $2.578 billion in Q4 2021. This was due to the company’s decision to exit its roughly 20% stake in Rosneft and its other affiliates in Russia in February 2022.
While BP may not have the best financial results, its planned capital expenditure of $14-15 billion in 2022 is significantly higher than Chevron’s and Exxon’s capital spending. This level of investment will continue each year through to 2025. $5-7 billion per annum will be invested in low-carbon energy and convenience & mobility segments, while resilient hydrocarbons will receive $9-10 billion annually. This should allow BP to grow faster than its peers, that are more interested in returning cash to shareholders.
The company expects to increase EBITDA for resilient hydrocarbons by a maximum of roughly 8% in 2030 from $30.6 billion in 2021. Convenience and mobility EBITDA is forecasted to double from $4.4 billion in 2021 to between $9 billion and $10 billion during the same period. Finally, low-carbon energy is currently in the growth phase and is forecasted to yield an EBITDA of $2-3 billion by 2030. BP offers a dividend yield of 4.02%.
Shane Vigna, Author at MyWallSt Blog