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.
Despite volatilities and uncertainties affecting the energy market, oil prices are highly favorable for upstream businesses. Integrated energy players’ midstream businesses are also sound since the companies generate stable fee-based revenues from pipeline and storage assets, thereby enhancing the outlook for the Zacks Oil and Gas Integrated Internationalindustry.
Among the frontrunners in the industry that will possibly make the most of the handsome business scenario are Exxon Mobil Corp., Chevron Corp. and BP plc.
About the Industry
The Zacks Oil and Gas Integrated International industry covers companies primarily involved in upstream, midstream and downstream operations. These companies have upstream businesses in the United States (including prolific shale plays and the deepwater Gulf of Mexico), Asia, South America, Africa, Australia and Europe. Midstream operations of energy companies entail transporting oil, natural gas liquids and refined petroleum products.
In downstream businesses, the firms buy raw crude to produce refined petroleum products. The companies’ downstream activities involve chemical businesses that manufacture raw materials for plastics. The integrated players are gradually focusing on renewables, leading to the energy transition. The firms aim to lower emissions from operations and cut the carbon intensity of the products sold.
3 Trends Shaping the Future of the Industry
High Oil Prices: The price of West Texas Intermediate (“WTI”) crude is trading higher than the $70-per-barrel mark, still favorable for exploration and production activities. Brent price is also handsome, trading at more than $75 per barrel. Per the U.S. Energy Information Administration, the WTI and Brent spot average prices will be $77.63 per barrel and $82.40, respectively, in 2023, suggesting that the upstream business environment will favor integrated players.
Stable Fee-Based Revenues: Integrated companies’ midstream businesses are relatively less exposed to the volatility in commodity prices. This is because pipeline and storage assets are usually booked by shippers for the long term, securing stable fee-based revenues.
Strong Focus on Lowering Emissions: Integrated players in the industry, with operations spreading across the United States and abroad, have recognized climate change as a serious risk that needs to be addressed. The companies are now focused on reducing greenhouse gas emissions and flaring rates.
Zacks Industry Rank Indicates Bullish Outlook
The Zacks Oil and Gas Integrated International industry is part of the broader Zacks Oil - Energy sector. It carries a Zacks Industry Rank #66, which places it in the top 26% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Zacks Oil and Gas Integrated International industry has underperformed the broader Zacks Oil - Energy sector and the Zacks S&P 500 composite over the past year.
The industry has risen 1.3% over this period, outpacing the S&P 500’s rally of 24.6% and the broader sector’s improvement of 3.0%.
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio. This is because the valuation metric takes not just equity into account but also the level of debt.
On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 3.16X, lower than the S&P 500’s 13.61X. It is also below the sector’s trailing 12-month EV/EBITDA of 3.59X.
Over the past five years, the industry has traded as high as 6.07X and as low as 2.57X, with a median of 4.46X.
3 Integrated International Stocks Moving Ahead of the Pack
BP: The British energy giant plans to become a net-zero emissions player by 2050 or earlier. The integrated company intends to invest and create its renewable energy generation capacity of 20 gigawatts by 2025. The company, currently carrying a Zacks Rank #3 (Hold), has solid upstream and downstream activities. BP also has a strong focus on reducing its debt load and has been returning capital to shareholders through buybacks and growing dividends.
Chevron: It is also a leading integrated energy player with operations across the world. Apart from a strong balance sheet, it has a solid capital discipline that will help it tide over volatile commodity prices. The energy major’s conservative capital spending will probably help CVX generate considerable cash flow, even in an unstable business scenario. The primary growth driver for the #3 Ranked stock, at least in the near term, is its low-cost Permian projects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ExxonMobil: It is among the largest integrated energy companies in the world. The energy major can rely on its strong balance sheet to withstand any business turmoil. ExxonMobil, with a Zacks Rank of 3, is banking on low-cost project pipelines centered around the Permian — the most prolific basin in the United States — and offshore Guyana resources.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights Exxon Mobil, Chevron and BP
For Immediate Release
Chicago, IL – December 18, 2023 – Today, Zacks Equity Research discusses Exxon Mobil Corp. (XOM - Free Report) , Chevron Corp. (CVX - Free Report) and BP plc (BP - Free Report) .
Industry: Oil & Gas - Integrated
Link: https://www.zacks.com/commentary/2198526/3-integrated-energy-stocks-to-gain-from-a-promising-industry
Despite volatilities and uncertainties affecting the energy market, oil prices are highly favorable for upstream businesses. Integrated energy players’ midstream businesses are also sound since the companies generate stable fee-based revenues from pipeline and storage assets, thereby enhancing the outlook for the Zacks Oil and Gas Integrated Internationalindustry.
Among the frontrunners in the industry that will possibly make the most of the handsome business scenario are Exxon Mobil Corp., Chevron Corp. and BP plc.
About the Industry
The Zacks Oil and Gas Integrated International industry covers companies primarily involved in upstream, midstream and downstream operations. These companies have upstream businesses in the United States (including prolific shale plays and the deepwater Gulf of Mexico), Asia, South America, Africa, Australia and Europe. Midstream operations of energy companies entail transporting oil, natural gas liquids and refined petroleum products.
In downstream businesses, the firms buy raw crude to produce refined petroleum products. The companies’ downstream activities involve chemical businesses that manufacture raw materials for plastics. The integrated players are gradually focusing on renewables, leading to the energy transition. The firms aim to lower emissions from operations and cut the carbon intensity of the products sold.
3 Trends Shaping the Future of the Industry
High Oil Prices: The price of West Texas Intermediate (“WTI”) crude is trading higher than the $70-per-barrel mark, still favorable for exploration and production activities. Brent price is also handsome, trading at more than $75 per barrel. Per the U.S. Energy Information Administration, the WTI and Brent spot average prices will be $77.63 per barrel and $82.40, respectively, in 2023, suggesting that the upstream business environment will favor integrated players.
Stable Fee-Based Revenues: Integrated companies’ midstream businesses are relatively less exposed to the volatility in commodity prices. This is because pipeline and storage assets are usually booked by shippers for the long term, securing stable fee-based revenues.
Strong Focus on Lowering Emissions: Integrated players in the industry, with operations spreading across the United States and abroad, have recognized climate change as a serious risk that needs to be addressed. The companies are now focused on reducing greenhouse gas emissions and flaring rates.
Zacks Industry Rank Indicates Bullish Outlook
The Zacks Oil and Gas Integrated International industry is part of the broader Zacks Oil - Energy sector. It carries a Zacks Industry Rank #66, which places it in the top 26% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms Sector and S&P 500
The Zacks Oil and Gas Integrated International industry has underperformed the broader Zacks Oil - Energy sector and the Zacks S&P 500 composite over the past year.
The industry has risen 1.3% over this period, outpacing the S&P 500’s rally of 24.6% and the broader sector’s improvement of 3.0%.
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the Enterprise Value/Earnings before Interest Tax Depreciation and Amortization (EV/EBITDA) ratio. This is because the valuation metric takes not just equity into account but also the level of debt.
On the basis of the trailing 12-month EV/EBITDA, the industry is currently trading at 3.16X, lower than the S&P 500’s 13.61X. It is also below the sector’s trailing 12-month EV/EBITDA of 3.59X.
Over the past five years, the industry has traded as high as 6.07X and as low as 2.57X, with a median of 4.46X.
3 Integrated International Stocks Moving Ahead of the Pack
BP: The British energy giant plans to become a net-zero emissions player by 2050 or earlier. The integrated company intends to invest and create its renewable energy generation capacity of 20 gigawatts by 2025. The company, currently carrying a Zacks Rank #3 (Hold), has solid upstream and downstream activities. BP also has a strong focus on reducing its debt load and has been returning capital to shareholders through buybacks and growing dividends.
Chevron: It is also a leading integrated energy player with operations across the world. Apart from a strong balance sheet, it has a solid capital discipline that will help it tide over volatile commodity prices. The energy major’s conservative capital spending will probably help CVX generate considerable cash flow, even in an unstable business scenario. The primary growth driver for the #3 Ranked stock, at least in the near term, is its low-cost Permian projects. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
ExxonMobil: It is among the largest integrated energy companies in the world. The energy major can rely on its strong balance sheet to withstand any business turmoil. ExxonMobil, with a Zacks Rank of 3, is banking on low-cost project pipelines centered around the Permian — the most prolific basin in the United States — and offshore Guyana resources.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +6.2 average gain per year. Amazingly, they soared with average gains of +46.4%, +49.5% and +55.2% per year. Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.