Volatility in oil and gas prices sometimes convinces investors to allocate money away from energy companies. The market has witnessed extreme volatility in commodity prices, with oil and gas prices riding up from the pandemic-hit record-low levels to a significant-high mark, the recent surge is being backed by Russia’s violent and unprovoked invasion of Ukraine. However, investors should not fret much since some energy players are relatively insulated from the extreme commodity price volatility.
Volatility in Oil & Gas Prices
Although oil and natural gas prices have improved drastically in the past year, by its very nature, the pricing scenario of the commodities remains volatile. Since the fate of exploration and production companies is directly proportional to oil and gas prices, the energy players’ businesses are highly exposed to volatility in commodity prices.
The upstream players’ business environment is currently favorable as both oil and gas prices are high, but a drop in prices will hurt the companies’ cashflows.
Stocks to Combat Volatility
Not all energy companies are exposed to volatility in commodity prices. Companies or partnerships operating oil and gas pipelines and storage facilities are relatively better positioned to sail through the price volatility.
This is because midstream energy players generate stable fee-based revenues for their transportation and storage assets contracted by shippers for a long period of time. With the employment of our proprietary
stock screener, we have shortlisted three midstream players that investors could bet on to combat volatility. One of the stocks sports a Zacks Rank #1 (Strong Buy), while the other two players carry a Zacks Rank #2 (Buy). You can see . the complete list of today’s Zacks #1 Rank stocks here The Williams Companies, Inc. ( WMB Quick Quote WMB - Free Report) is the operator of pipeline assets spanning more than 30,000 miles. The Williams Companies generates stable cashflows as its midstream infrastructures handle 30% of the natural gas consumed every day in the United States.
WMB is not only focused on strengthening its balance sheet but also attentive to capital discipline. Over the past 30 days, The Williams Companies, with a Zacks Rank of 1, has witnessed upward earnings estimate revisions for 2022.
Another well-known name in the midstream space is
MPLX LP ( MPLX Quick Quote MPLX - Free Report) . The partnership generates stable cashflows, backed by its huge network of crude oil and refined petroleum product pipelines. MPLX LP’s assets also comprise natural gas and NGL processing and fractionation facilities.
MPLX, with a Zacks Rank of 2, has a low-cost business culture and strict capital discipline. Over the past 30 days, MPLX LP has witnessed upward earnings estimate revisions for 2022.
Pembina Pipeline Corporation ( PBA Quick Quote PBA - Free Report) , a leading name in the midstream space, has been serving the energy industry in North America for more than 65 years. Pembina Pipeline’s pipeline network spans more than 18,000 kilometers.
In 2022 and 2023, #2 Ranked Pembina Pipeline is likely to witness year-over-year earnings growth of 39.6% and 6.5%, respectively.