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Here's Why Hess (HES) Stock Surged 92% in the Past Year
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Hess Corporation (HES - Free Report) has surged 92% in the past year compared with 66.4% growth of the composite stocks belonging to the industry.
The company, currently carrying a Zacks Rank #3 (Hold), has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 60 days.
Image Source: Zacks Investment Research
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
The West Texas Intermediate crude price has touched the $79-per-barrel mark again. Being one of the largest producers in the deepwater Gulf of Mexico, Hess is well-positioned to capitalize on the improvement in the crude price.
Hess made multiple oil discoveries at the Stabroek Block offshore Guyana. The company’s two latest discoveries at the Seabob-1 and Kiru-Kiru-1 wells will add to the block’s recoverable resource estimate. Hess expects the production to reach 1 million barrels per day by 2027.
Hess made a final investment decision for the Yellowtail development offshore Guyana. Commencing 2025, the project will develop an estimated resource of more than 900 million oil barrels. Hence, the company’s cash flow situation is expected to make a major jump, which will enable it to increase shareholder returns.
For 2022, Hess has revised its net production guidance (excluding Libya) upward to 325,000 barrels of oil equivalent per day (Boe/d) from the prior stated 320,000 Boe/d. For the fourth quarter, net production (excluding Libya) is projected to be 370,000 Boe/d. Coupled with higher oil prices, increased production will boost the company’s bottom line.
Numerous factors are aiding the stock price surge for HES and are creating more room for upside. Hess is expecting significant free cash flow growth in the coming years, which will get allocated toward reducing debt load and returning capital to shareholders.
Risks
One factor that could offset the positives to some extent is that Hess has been persistently generating lower dividend yields than the market over the past few years. The partnership’s dividend yield of 1.1% is lower than the industry average of 1.7%.
Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. MUSA’s third-quarter 2022 earnings per share of $9.28 beat the Zacks Consensus Estimate of $7.82.
Murphy USA is expected to see an earnings surge of 80.9% in 2022. In more good news for investors, MUSA’s board of directors recently declared a quarterly cash dividend of 35 cents per share to its common shareholders, marking a 9% sequential increase.
Oceaneering International, Inc. (OII - Free Report) is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. OII’s third-quarter 2022 adjusted profit of 23 cents per share beat the Zacks Consensus Estimate of 13 cents.
OII is expected to see an earnings rise of 82.4% in 2022. For 2022, Oceaneering projects consolidated EBITDA of $215-$240 million and continued significant free cash flow generation of $25-$75 million.
Helmerich & Payne Inc. (HP - Free Report) is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. HP’s fiscal third-quarter 2022 adjusted profit of 27 cents per share beat the Zacks Consensus Estimate of 5 cents.
Helmerich & Payne is expected to see an earnings surge of 277.8% in 2022. HP boasts a strong balance sheet, carrying $542.3 million in long-term debt. The company’s debt-to-capitalization stands at just 16.6% compared with many of its peers that are hugely burdened with debts.
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Here's Why Hess (HES) Stock Surged 92% in the Past Year
Hess Corporation (HES - Free Report) has surged 92% in the past year compared with 66.4% growth of the composite stocks belonging to the industry.
The company, currently carrying a Zacks Rank #3 (Hold), has witnessed upward earnings estimate revisions for 2022 and 2023 in the past 60 days.
Image Source: Zacks Investment Research
Let’s delve into the factors behind the stock’s price appreciation.
What’s Favoring the Stock?
The West Texas Intermediate crude price has touched the $79-per-barrel mark again. Being one of the largest producers in the deepwater Gulf of Mexico, Hess is well-positioned to capitalize on the improvement in the crude price.
Hess made multiple oil discoveries at the Stabroek Block offshore Guyana. The company’s two latest discoveries at the Seabob-1 and Kiru-Kiru-1 wells will add to the block’s recoverable resource estimate. Hess expects the production to reach 1 million barrels per day by 2027.
Hess made a final investment decision for the Yellowtail development offshore Guyana. Commencing 2025, the project will develop an estimated resource of more than 900 million oil barrels. Hence, the company’s cash flow situation is expected to make a major jump, which will enable it to increase shareholder returns.
For 2022, Hess has revised its net production guidance (excluding Libya) upward to 325,000 barrels of oil equivalent per day (Boe/d) from the prior stated 320,000 Boe/d. For the fourth quarter, net production (excluding Libya) is projected to be 370,000 Boe/d. Coupled with higher oil prices, increased production will boost the company’s bottom line.
Numerous factors are aiding the stock price surge for HES and are creating more room for upside. Hess is expecting significant free cash flow growth in the coming years, which will get allocated toward reducing debt load and returning capital to shareholders.
Risks
One factor that could offset the positives to some extent is that Hess has been persistently generating lower dividend yields than the market over the past few years. The partnership’s dividend yield of 1.1% is lower than the industry average of 1.7%.
Key Picks
Investors interested in the energy sector might look at the following companies that presently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Murphy USA Inc. (MUSA - Free Report) is a leading independent retailer of motor fuel and convenience merchandise in the United States. MUSA’s third-quarter 2022 earnings per share of $9.28 beat the Zacks Consensus Estimate of $7.82.
Murphy USA is expected to see an earnings surge of 80.9% in 2022. In more good news for investors, MUSA’s board of directors recently declared a quarterly cash dividend of 35 cents per share to its common shareholders, marking a 9% sequential increase.
Oceaneering International, Inc. (OII - Free Report) is one of the leading suppliers of offshore equipment and technology solutions to the energy industry. OII’s third-quarter 2022 adjusted profit of 23 cents per share beat the Zacks Consensus Estimate of 13 cents.
OII is expected to see an earnings rise of 82.4% in 2022. For 2022, Oceaneering projects consolidated EBITDA of $215-$240 million and continued significant free cash flow generation of $25-$75 million.
Helmerich & Payne Inc. (HP - Free Report) is a major land and offshore drilling contractor in the western hemisphere, having the youngest and most efficient drilling fleet. HP’s fiscal third-quarter 2022 adjusted profit of 27 cents per share beat the Zacks Consensus Estimate of 5 cents.
Helmerich & Payne is expected to see an earnings surge of 277.8% in 2022. HP boasts a strong balance sheet, carrying $542.3 million in long-term debt. The company’s debt-to-capitalization stands at just 16.6% compared with many of its peers that are hugely burdened with debts.