Oil prices rallied on Wednesday to trade above $70 a barrel, representing a 32-month high. This can be attributed primarily to rising demand as the global economic recovery drives a revival of industrial activities and mobility. Continued supply cuts by the world’s largest oil producers are also supporting the rally.
Because OPEC and its non-OPEC partners recently confirmed that they will ease production cuts gradually, oil prices should continue rallying. Based on this, and a strengthening demand outlook, analysts expect oil prices to hit $80 a barrel or more this summer. Investors’ interest in this sector is evident in the SPDR S&P Oil & Gas Exploration & Production ETF’s (XOP - Get Rating) 12.8% gains over the past month compared to SPDR S&P 500 Trust ETF’s (SPY - Get Rating) 0.1% loss.
So, we think it could be wise to buy shares of Canadian Natural Resources Limited (CNQ - Get Rating), Ovintiv Inc. (OVV - Get Rating), Whiting Petroleum Corporation (WLL - Get Rating), and Vermilion Energy Inc. (VET - Get Rating) because they are expected to benefit significantly from the rising oil prices.
Canadian Natural Resources Limited (CNQ)
Headquartered in Calgary, Canada, CNQ explores, develops, markets, and produces crude oil, natural gas and natural gas liquids (NGLs). The company’s segments include oil sands mining and upgrading, and midstream and refining.
CNQ’s product sales increased 50.9% year-over-year to CAD7.02 billion ($5.80 billion) for the first quarter, ended March 31, 2021. The company’s crude oil and NGLs’ sales from North America came in at CAD3.10 billion ($2.56 billion), up 67.3% year-over-year. Its net income was CAD1.38 billion ($1.14 billion) compared to a CAD1.28 billion ($1.06 billion) net loss in the prior-year period. Its EPS came in at CAD1.16 ($0.96) compared to loss per share of CAD1.08 ($0.89) in the year-ago period.
Analysts expect CNQ’s EPS to increase 1,081.9% year-over-year to $1 for the quarter ending September 30, 2021. It surpassed the consensus estimate in each of the trailing four quarters. Its annual revenue is expected to increase 59.8% year-over-year to $21.31 billion in fiscal 2021.
The company declared a CAD0.47 ($0.39) quarterly cash dividend, payable on July 5, 2021. CNQ has consistently paid dividends over the past 19 years. The stock has gained 104.3% over the past nine months to close yesterday’s trading session at $37.03.
It’s no surprise that CNQ has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Growth, Sentiment, and Momentum, and a B grade for Quality. Click here to see CNQ’s ratings for Stability and Value as well.
CNQ is ranked #3 of 51 stocks in the B-rated Foreign Oil & Gas industry.
Ovintiv Inc. (OVV)
OVV is a resource company that is focused on developing its multi-basin portfolio of oil and natural gas assets located across the United States and Canada. The company operates through segments that include Canadian operations, USA operations and market optimization.
For the first quarter, ended March 31, 2021, OVV’s product and services revenues came in at $2.25 billion, which represents a 43.1% year-over-year rise. The company’s non-GAAP operating income was $293 million, up 985.2% year-over year. It’s non-GAAP cash flow increased 66.4% year-over-year to $890 million.
For the current quarter, ending June 30, 2021, analysts expect OVV’s EPS and revenue to increase 332.6% and 37.8%, respectively, year-over-year to $1.00 and $1.71 billion. It surpassed consensus EPS estimates in each l of the trailing four quarters.
On May 19, 2021, OVV closed its previously announced Eagle Ford asset sale. The proceeds from the sale, combined with proceeds received recently from its Duvernay asset sale, is expected to be used for debt reduction. The stock has rallied 236.8% over the past nine months to close yesterday’s trading session at $30.95.
OVV’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Momentum, and a B grade for Growth. In addition to these , one can see OVV’s ratings for Sentiment, Quality, Stability and Value here.
OVV is ranked #15 in the Foreign Oil & Gas industry.
Whiting Petroleum Corporation (WLL)
WLL is an independent oil and gas company that develops and produces crude oil, natural gas and NGLs primarily in the Rocky Mountains region of the United States. It sells its oil and gas production to end users, marketers, and other purchasers.
WLL’s total operating revenues came in at $307.39 million for the first quarter, ended March 31, 2021, representing a 44.8% sequential rise. This rise can be attributed primarily to an increase in commodity prices during the period. The company’s adjusted net income for the quarter was $107.89 million, up 94.3% sequentially. Its adjusted EPS increased 91.1% sequentially to $2.79.
Analysts expect WLL’s EPS to increase 664.7% year-over-year to $1.92 for the quarter ending September 30, 2021. It surpassed the Street’s EPS estimates in three of the trailing four quarters. Its revenue for the current quarter, ending June 30, 2021, is expected to be $242.03 million, up 164.2%.
Company CEO Lynn A. Peterson said, “With one quarter in the books, looking ahead at the full year while using a $55 WTI oil price, we expect to generate approximately $550 million in EBITDA and approximately $300 million of adjusted free cash flow, both after estimated hedge losses of $130 million.” The stock has gained more than 131% over the past nine months to close yesterday’s trading session at $49.92.
WLL’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Momentum, and a B grade for Quality and Growth. Click here to see the additional POWR Ratings for WLL (Stability, Sentiment and Value).
WLL is ranked #2 of 12 stocks in the Energy-Drilling industry.
Vermilion Energy Inc. (VET)
Together with its subsidiaries, VET acquires , explores, develops, and produces petroleum and natural gas in North America, Europe, and Australia. The Canada-based company is focused primarily on conventional and semi-conventional exploration and development projects.
For the first quarter, ended March 31, 2021, VET’s petroleum and natural gas revenue increased 6.3% year-over-year to CAD375.46 million ($310.26 million). The company’s NGL sales from the USA came in at CAD3.28 million ($2.71 million), up 55.6% year-over-year. VET’s net income was CAD500 million ($413.17 million) compared to a CAD1.32 billion ($1.09 billion) net loss in the prior-year quarter. Its EPS came in at CAD3.10 ($2.56) compared to loss per share of CAD8.42 ($6.96) in the year-ago period.
The company’s annual revenue is expected to increase 27.8% year-over-year to $1.13 billion in 2021. VET surpassed consensus EPS estimates in each of the trailing four quarters. The stock has soared 166.7% over the past nine months to close yesterday’s trading session at $8.54.
It’s no surprise that VET has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Momentum, and B grade for Value, Sentiment and Quality. Click here to see VET’s ratings for Growth and Stability as well.
VET is ranked #10 in the Foreign Oil & Gas industry.
CNQ shares were trading at $37.12 per share on Thursday morning, up $0.09 (+0.24%). Year-to-date, CNQ has gained 54.35%, versus a 13.60% rise in the benchmark S&P 500 index during the same period.