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Top Crude Oil Companies to Purchase as tensions increase

top crude oil companies to purchase

In bear market of 2022, oil stocks took the limelight with their success stories. Even though higher inflation adversely impacted consumer spending and business sentiment, it positively impacted prices of crude oil. Therefore, investors were able to book some gains from top crude oil companies. Apart from this, Russia’s invasion of Ukraine stemmed the performance of oil stocks, which saw strong gains, despite S&P 500 index’s ~20% fall for entire year. However, 2023 has a different story altogether. Crude oil prices saw substantial decline, nearly falling ~50% from 2022 peak at ~$120 per barrel. Therefore, top crude oil companies have seen some challenges in current year. 

That being said, prices of oil saw a significant jump to ~$98 per barrel by mid-September after recent decision by Saudi Arabia and Russia to extend voluntary production cuts till 2023 end. Such move drew strong attention and increased prices even higher. As per IEA Oil Market Report (OMR), market started to focus on possibility of “higher for longer” interest rates. This can impede economic and growth of demand. However, when October started, benchmark Brent futures saw significant drop of more than $12 per barrel, declining to $84 per barrel.  

Apart from this, higher geopolitical tensions in the Middle East, region which is accountable for over a third of the world’s seaborne oil trade, impacted financial markets. After Hamas’ unexpected attack on Israel, traders quickly factored in the risk premium of ~$3-$4 per barrel when the markets opened. Since then, we saw some stabilization in the oil prices. 

In the current market, experts believe that crude oil stocks might show some volatility, yet a range of them continue to act as top crude oil companies globally, which are expected to provide healthy shareholder returns. 

With this in mind, let us now have a look at top crude oil companies to purchase as tensions increase.

1. Enbridge Inc.

The company owns extensive midstream assets which transport hydrocarbons throughout the U.S. and Canada.

It saw 2Q GAAP earnings of $1.8 billion or $0.91 per common share as compared to GAAP earnings of $0.5 billion or $0.22 per common share in 2022. Cash provided by operating activities came in at $3.4 billion in comparison to $2.5 billion in 2022. Continuing strong start to 2023, the company’s 4 businesses saw another strong quarter of financial performance. The company continues to execute its strategic priorities and it is on track to achieve its full-year EBITDA and DCF per share guidance. 

During 1H of the year, the company reached win-win-win settlement with its customers on Mainline, which further improves the utility-like profile of the company’s cash flow. 

Through 1H23, the company continued to deliver on its capital allocation commitments. It executed on its $1.1 billion of accretive tuck-in M&A and is on track to place ~$3 billion of capital into service this year. The company has healthy balance sheet, with its debt-to-EBITDA coming at bottom end of target range. 

Looking forward, financial discipline, secured capital program execution, and making use of discretionary investment capacity provides the company confidence that it will generate ~4%-6% EBITDA growth per year through 2025 and ~5% thereafter.

2. Halliburton Company

The company has been categorised as world’s second-largest oilfield-services company. 

It saw net income of $716 million, or $0.79 per diluted share in 3Q23 in comparison to net income for the 2Q23 of $610 million, or $0.68 per diluted share and adjusted net income, excluding the losses incurred on transactions in Argentina, of $691 million, or $0.77 per diluted share.

It delivered strong results for 3Q and its margin strength demonstrated the power of its strategy. The company delivered strong returns to its shareholders as exhibited by over $500 million of FCF and repurchases of ~$200 million of common stock and $150 million of debt during 3Q23. Drilling and evaluation revenue in 3Q23 came in at $2.3 billion while operating income was $378 million.

3. Marathon Petroleum Corporation

The company is an independent refiner with 13 refineries in the midcontinent, West Coast, and Gulf Coast of the US, with total throughput capacity of ~2.9 million bpd.

The company saw net income attributable to MPC of $3.3 billion, or $8.28 per diluted share, in 3Q23 in comparison to net income attributable to MPC of $4.5 billion, or $9.06 per diluted share in 3Q22.

Business of the company generated $5 billion of net cash provided by operating activities and it returned $3.1 billion in the form of share repurchases and dividends during 3Q23. Maintaining its focus on returning capital, it increased its quarterly dividend by ~10% and increased share repurchase authorization by $5 billion. 

Talking about refining & marketing, segment adjusted EBITDA came in at $4.4 billion in 3Q23 in comparison to $5.5 billion for 3Q22. Decrease in segment adjusted EBITDA was because of lower market crack spreads. 

As of September 30, 2023, the company had $13.1 billion of cash, cash equivalents, and short-term investments and it had ~$5 billion available on bank revolving credit facility. 

Analysts at Royal Bank of Canada initiated their coverage on the shares of the company, and increased their target price from $148.00 to $152.00. The company gave an “Outperform” rating in the research note dated August 2nd. Barclays increased its target objective on the company’s shares from $152.00 to $155.00 in a research note dated October 5th.

James Investment Research Inc. increased stake in the company’s shares by ~65.2% in 1st quarter. It now owns ~228 shares of this company’s stock worth ~$31,000 after it acquired additional ~90 shares during the period.

Conclusion 

While above are some of the promising top crude oil companies to purchase, there are several other renowned companies in the market which should deliver healthy and stabilised returns. 

Right now, the global oil prices are being impacted by several market forces such as inflation, geopolitical unrest, etc. While, as of now, there hasn’t been direct impact oil’s physical supply, markets are expected to remain in a state of anticipation as these tensions continue.

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I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as Investing.com, Stockhouse.com, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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