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4 Energy Stocks to Gain From the Prospering Integrated US Industry
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Although crude prices have declined significantly, the pricing environment is still favorable for exploration and production activities. Furthermore, integrated energy firms' midstream segments continue to perform well, thanks to consistent revenues from fees associated with pipeline and storage facilities. This strong performance enhances the outlook for the Zacks Oil & Gas US Integrated industry.
Leading contenders in the industry poised to capitalize on this favorable business environment include ConocoPhillips (COP - Free Report) , Occidental Petroleum Corporation (OXY - Free Report) , National Fuel Gas Company (NFG - Free Report) and Epsilon Energy Ltd (EPSN - Free Report) .
About the Industry
The Zacks Oil & Gas US Integrated industry comprises companies primarily involved in upstream and midstream energy businesses. The upstream operations entail oil and natural gas exploration and production in the prolific shale plays of the United States. The integrated energy companies are also engaged in midstream businesses through gathering and processing facilities along with transportation pipeline networks and storage sites. Overall, the upstream business is positively correlated to oil and gas prices. The produced commodity volumes are transported through midstream assets, generating stable fee-based revenues. The integrated energy players in the United States also have access to downstream operations wherein the transported oil volumes are converted to finished products, comprising gasoline, natural gas liquids and diesel, through refining activities.
3 Trends Shaping the Future of the Industry
Oil Prices Still Favorable: Although oil prices have plunged recently, the breakeven price in most shale plays in the United States, including Permian, is significantly lower than the current oil price. It seems that upstream operations are still profitable for most of the companies belonging to the industry.
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 & Gas US Integrated industry is a 15-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #78, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright 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 Lags S&P 500 & Sector
The Zacks Oil & Gas US Integrated industry has underperformed the broader Zacks Oil - Energy sector and the Zacks S&P 500 composite over the past year.
The industry has plunged 31.8% over this period compared with the broader sector’s decline of 18% and the S&P 500’s fall of 1.7%.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt.
Based on the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 4.61X, lower than the S&P 500’s 14.66X. It is, however, higher than the sector’s trailing 12-month EV/EBITDA of 4.09X.
Over the past five years, the industry has traded as high as 14.35X and as low as 3.33X, with a median of 5.02X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
4 US Integrated Oil Stocks Moving Ahead of the Pack
ConocoPhillips
COP has achieved a promising production outlook by leveraging its extensive drilling inventory and diversified upstream assets. Compared to composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that the company, currently carrying a Zacks Rank #3 (Hold), is better positioned to rely on its strong balance sheet to withstand any adverse business scenario.
Price and Consensus: COP
Occidental Petroleum
Occidental Petroleum, with a Zacks Rank of 3, is a leading energy company with a significant footprint in prolific shale plays in the United States, comprising the Permian and DJ basins, and offshore Gulf of America. OXY’s reserve replacement in 2024 was 230%, meaning the company added more oil and natural gas than it utilized last year.
Price and Consensus: OXY
National Fuel Gas
National Fuel Gas is not only involved in developing its huge core resources in the prolific Marcellus and Utica shale plays but also in the expansion of its pipeline networks. NFG also has a huge utility customer base. With a solid track record of dividend payments for as high as 122 years, National Fuel Gas, sporting a Zacks Rank #1 (Strong Buy), is highly committed to returning capital to shareholders. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: NFG
Epsilon Energy
Being an on-shore independent natural gas and oil company, Epsilon Energy is well placed to capitalize on mounting clean energy demand. Its upstream operations are spread across the prolific Marcellus Shale and Permian basin. Having a 35% interest in the Auburn Gas Gathering System, EPSN generates stable cash flows. The company, carrying a Zacks Rank #2 (Buy), is debt-free and has $45 million available on its undrawn revolving credit facility.
Price and Consensus: EPSN
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4 Energy Stocks to Gain From the Prospering Integrated US Industry
Although crude prices have declined significantly, the pricing environment is still favorable for exploration and production activities. Furthermore, integrated energy firms' midstream segments continue to perform well, thanks to consistent revenues from fees associated with pipeline and storage facilities. This strong performance enhances the outlook for the Zacks Oil & Gas US Integrated industry.
Leading contenders in the industry poised to capitalize on this favorable business environment include ConocoPhillips (COP - Free Report) , Occidental Petroleum Corporation (OXY - Free Report) , National Fuel Gas Company (NFG - Free Report) and Epsilon Energy Ltd (EPSN - Free Report) .
About the Industry
The Zacks Oil & Gas US Integrated industry comprises companies primarily involved in upstream and midstream energy businesses. The upstream operations entail oil and natural gas exploration and production in the prolific shale plays of the United States. The integrated energy companies are also engaged in midstream businesses through gathering and processing facilities along with transportation pipeline networks and storage sites. Overall, the upstream business is positively correlated to oil and gas prices. The produced commodity volumes are transported through midstream assets, generating stable fee-based revenues. The integrated energy players in the United States also have access to downstream operations wherein the transported oil volumes are converted to finished products, comprising gasoline, natural gas liquids and diesel, through refining activities.
3 Trends Shaping the Future of the Industry
Oil Prices Still Favorable: Although oil prices have plunged recently, the breakeven price in most shale plays in the United States, including Permian, is significantly lower than the current oil price. It seems that upstream operations are still profitable for most of the companies belonging to the industry.
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 & Gas US Integrated industry is a 15-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #78, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright 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 Lags S&P 500 & Sector
The Zacks Oil & Gas US Integrated industry has underperformed the broader Zacks Oil - Energy sector and the Zacks S&P 500 composite over the past year.
The industry has plunged 31.8% over this period compared with the broader sector’s decline of 18% and the S&P 500’s fall of 1.7%.
One-Year Price Performance
Industry's Current Valuation
Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt.
Based on the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 4.61X, lower than the S&P 500’s 14.66X. It is, however, higher than the sector’s trailing 12-month EV/EBITDA of 4.09X.
Over the past five years, the industry has traded as high as 14.35X and as low as 3.33X, with a median of 5.02X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio
4 US Integrated Oil Stocks Moving Ahead of the Pack
ConocoPhillips
COP has achieved a promising production outlook by leveraging its extensive drilling inventory and diversified upstream assets. Compared to composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that the company, currently carrying a Zacks Rank #3 (Hold), is better positioned to rely on its strong balance sheet to withstand any adverse business scenario.
Price and Consensus: COP
Occidental Petroleum
Occidental Petroleum, with a Zacks Rank of 3, is a leading energy company with a significant footprint in prolific shale plays in the United States, comprising the Permian and DJ basins, and offshore Gulf of America. OXY’s reserve replacement in 2024 was 230%, meaning the company added more oil and natural gas than it utilized last year.
Price and Consensus: OXY
National Fuel Gas
National Fuel Gas is not only involved in developing its huge core resources in the prolific Marcellus and Utica shale plays but also in the expansion of its pipeline networks. NFG also has a huge utility customer base. With a solid track record of dividend payments for as high as 122 years, National Fuel Gas, sporting a Zacks Rank #1 (Strong Buy), is highly committed to returning capital to shareholders. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: NFG
Epsilon Energy
Being an on-shore independent natural gas and oil company, Epsilon Energy is well placed to capitalize on mounting clean energy demand. Its upstream operations are spread across the prolific Marcellus Shale and Permian basin. Having a 35% interest in the Auburn Gas Gathering System, EPSN generates stable cash flows. The company, carrying a Zacks Rank #2 (Buy), is debt-free and has $45 million available on its undrawn revolving credit facility.
Price and Consensus: EPSN