Oil prices are coming down from their record highs. Prices have plummeted 13% over the past month and are now trading more than 20% below their 2022 peak. The prospect of a global slowdown is affecting oil prices.
Despite slowing momentum, the oil and gas sector has outperformed amid the dismal stock market performance. Moreover, JPMorgan Chase & Co. (JPM) believes that global oil prices could potentially climb to $380/bbl.
On top of it, the International Energy Agency (IEA) has forecasted world oil demand to reach 101.6 mb/d in 2023, climbing over pre-pandemic levels, on the back of China seeing its demand hit 2.2 mb/d next year.
Given this backdrop, we think it could be best to stay invested in oil and gas stocks Exxon Mobil Corporation (XOM) and ConocoPhillips (COP).
Exxon Mobil Corporation (XOM)
XOM engages in the exploration and production of crude oil and natural gas in the United States and globally. The company operates through the broad segments of Upstream; Downstream; and Chemical. It also manufactures, trades, transports, and sells crude oil, natural gas, and petrochemicals.
On June 21, XOM and QatarEnergy announced the signing of an agreement to develop Qatar’s North Field East project. The company’s continuing partnership with Qatar is expected to benefit stakeholders.
On May 25, XOM announced its plan to increase shareholder value, which helps meet the need for lower greenhouse emissions and to address climate change. Darren Woods, chairman, and the chief executive officer, stated, "Recent events have reminded us how globally connected energy markets are. They’ve also underscored the importance of our role in creating sustainable solutions that improve quality of life while supporting a lower-emissions future."
For the fiscal first quarter ended March 31, XOM’s total revenues and other income increased 53% year-over-year to $90.50 billion. Net income attributable to XOM rose 100.7% from the prior-year quarter to $5.48 billion, while earnings per common share improved 100% from the same period the prior year to $1.28.
The consensus EPS estimate of $3.02 for the quarter ended June 2022 indicates a 174.5% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $119.64 billion reflects an improvement of 76.6% from the prior-year period. XOM has beaten consensus EPS estimates in three out of the trailing four quarters, which is impressive.
The stock has gained 42.3% over the past year and 40.5% year-to-date to close its last trading session at $85.94.
XOM’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. The stock has a Momentum grade of A and a Quality grade of B.
In the 97-stock Energy – Oil & Gas industry, XOM is ranked #63. The industry is rated B. Click here to see the additional POWR Ratings for XOM (Growth, Value, Stability, and Sentiment).
ConocoPhillips (COP)
COP engages in the exploration, production, transportation, and marketing of crude oil, bitumen, natural gas, and natural gas liquids (NGLs). The company’s portfolio comprises conventional and tight oil reservoirs, shale gas, heavy oil, LNG, oil sands, and other operations.
On May 5, COP announced a $2 billion increase in expected 2022 returns of capital to $10 billion. The company also declared an ordinary dividend of 46 cents per share and a third-quarter variable return of cash (VROC) payment of 70 cents per share. This reflects upon its cash generation ability.
COP’s total revenues and other income increased 82.7% year-over-year to $19.29 billion in the fiscal first quarter of 2022. Adjusted earnings after tax and adjusted earnings per share of common stock improved 375.5% and 373.9% from the same period the prior year to $4.29 billion and $3.27.
Street EPS estimate of $3.80 for the quarter ended June 2022 indicates a 199.2% year-over-year increase. Likewise, Street revenue estimate for the same quarter of $18.99 billion reflects an improvement of 86% from the prior-year quarter. Moreover, COP has an impressive surprise earnings history as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 46.3% over the past year and 19.6% year-to-date to close its last trading session at $86.35.
It’s no surprise that COP has an overall B rating, which translates to Buy in our POWR Ratings system.
COP has an A grade for Momentum and a B for Sentiment and Quality. It is ranked #23 in the Energy – Oil & Gas industry. To see the additional POWR Ratings for Growth, Value, and Stability for COP, click here.
XOM shares were trading at $86.27 per share on Friday morning, up $0.33 (+0.38%). Year-to-date, XOM has gained 44.01%, versus a -17.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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