We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Here's Why You Should Hold on to Hess (HES) Stock for Now
Read MoreHide Full Article
Hess Corporation (HES - Free Report) has gained 27% in the past year compared with 7.4% growth of the composite stocks belonging to the industry.
The company, currently carrying a Zacks Rank #3 (Hold), beat the Zacks Consensus Estimate in the prior four quarters, the average surprise being 4.9%.
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 $70-per-barrel mark, highlighting a handsome commodity pricing environment. Being one of the largest deepwater Gulf of Mexico producers, Hess is well-positioned to capitalize on the improving crude price.
Hess made multiple oil discoveries at the Stabroek Block offshore Guyana. The company recently made a final investment decision to proceed with the fifth oil development project in Stabroek block, after receiving government approvals. The project has the potential to support future oil development on the Stabroek Block.
Hess expects oil production from the country’s next three production vessels to surpass the expected capacity. By the end of 2027, HES hopes to have six FPSOs, with a gross output capacity of more than 1.2 million barrels per day.
For 2023, Hess revised its net production guidance (excluding Libya) upward to 365,000-375,000 barrels of oil equivalent per day (Boe/d). The metric suggests an increase from the 344,000 Boe/d reported in 2022. Coupled with higher oil prices, increased production will boost the company’s bottom line.
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. The company expects cash flow to increase 25% annually over the next five years, with crude oil price at $75 per barrel.
The company also intends to distribute 75% of the annual free cash flow to shareholders through dividend hikes and share repurchases. This reflects its strong commitment to returning capital to its shareholders.
Numerous factors are aiding the stock price increase for HES and are creating more room for upside.
Risks
One factor that can offset the positives to some extent is Hess’ significant level of leverage, which can affect the company’s financial flexibility. The company has significantly higher exposure to debt capital than the composite stocks belonging to the industry.
Seadrill is a market-leading international driller with strong exposure in key strategic basins like the U.S. Gulf of Mexico, Brazil and Angola. SDRL reported first-quarter 2023 earnings of 83 cents per share, beating the Zacks Consensus Estimate of earnings of 55 cents per share.
Seadrill has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for SDRL’s 2023 and 2024 earnings is pegged at $2.93 per share and $4.01 per share, respectively.
Evolution Petroleum is an independent energy company. EPM reported first-quarter 2023 earnings of 42 cents per share, beating the Zacks Consensus Estimate of earnings of 17 cents per share.
Evolution Petroleum has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for EPM’s 2023 and 2024 earnings is pegged at $1.11 and $1.05 per share, respectively.
PHX Minerals is an oil and natural gas mineral company. The company posted first-quarter 2023 earnings of 11 cents per share, beating the Zacks Consensus Estimate of earnings of 7 cents per share.
PHX has witnessed upward earnings estimate revisions for 2024 in the past 60 days. The consensus estimate for the company’s 2023 and 2024 earnings per share is pegged at 28 cents and 45 cents, respectively.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Here's Why You Should Hold on to Hess (HES) Stock for Now
Hess Corporation (HES - Free Report) has gained 27% in the past year compared with 7.4% growth of the composite stocks belonging to the industry.
The company, currently carrying a Zacks Rank #3 (Hold), beat the Zacks Consensus Estimate in the prior four quarters, the average surprise being 4.9%.
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 $70-per-barrel mark, highlighting a handsome commodity pricing environment. Being one of the largest deepwater Gulf of Mexico producers, Hess is well-positioned to capitalize on the improving crude price.
Hess made multiple oil discoveries at the Stabroek Block offshore Guyana. The company recently made a final investment decision to proceed with the fifth oil development project in Stabroek block, after receiving government approvals. The project has the potential to support future oil development on the Stabroek Block.
Hess expects oil production from the country’s next three production vessels to surpass the expected capacity. By the end of 2027, HES hopes to have six FPSOs, with a gross output capacity of more than 1.2 million barrels per day.
For 2023, Hess revised its net production guidance (excluding Libya) upward to 365,000-375,000 barrels of oil equivalent per day (Boe/d). The metric suggests an increase from the 344,000 Boe/d reported in 2022. Coupled with higher oil prices, increased production will boost the company’s bottom line.
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. The company expects cash flow to increase 25% annually over the next five years, with crude oil price at $75 per barrel.
The company also intends to distribute 75% of the annual free cash flow to shareholders through dividend hikes and share repurchases. This reflects its strong commitment to returning capital to its shareholders.
Numerous factors are aiding the stock price increase for HES and are creating more room for upside.
Risks
One factor that can offset the positives to some extent is Hess’ significant level of leverage, which can affect the company’s financial flexibility. The company has significantly higher exposure to debt capital than the composite stocks belonging to the industry.
Key Picks
Some better-ranked players in the energy space are Seadrill Limited (SDRL - Free Report) , Evolution Petroleum Corporation (EPM - Free Report) and PHX Minerals Inc. (PHX - Free Report) . SDRL and EPM currently sport a Zacks Rank of 1 (Strong Buy), and PHX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Seadrill is a market-leading international driller with strong exposure in key strategic basins like the U.S. Gulf of Mexico, Brazil and Angola. SDRL reported first-quarter 2023 earnings of 83 cents per share, beating the Zacks Consensus Estimate of earnings of 55 cents per share.
Seadrill has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for SDRL’s 2023 and 2024 earnings is pegged at $2.93 per share and $4.01 per share, respectively.
Evolution Petroleum is an independent energy company. EPM reported first-quarter 2023 earnings of 42 cents per share, beating the Zacks Consensus Estimate of earnings of 17 cents per share.
Evolution Petroleum has witnessed upward earnings estimate revisions for 2023 and 2024 in the past 60 days. The consensus estimate for EPM’s 2023 and 2024 earnings is pegged at $1.11 and $1.05 per share, respectively.
PHX Minerals is an oil and natural gas mineral company. The company posted first-quarter 2023 earnings of 11 cents per share, beating the Zacks Consensus Estimate of earnings of 7 cents per share.
PHX has witnessed upward earnings estimate revisions for 2024 in the past 60 days. The consensus estimate for the company’s 2023 and 2024 earnings per share is pegged at 28 cents and 45 cents, respectively.