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3 Energy Stocks With Fortress Balance Sheet to Gain in 2024
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The West Texas Intermediate (WTI) crude oil price is hovering around the $75 per barrel mark and is expected to stay favorable into the coming year. Specifically, the U.S. Energy Information Administration (“EIA”) anticipates WTI oil price of $78.07 per barrel in 2024, slightly surpassing its projected figure of $77.63 for the current year. Contributing to the strength of commodity prices are additional voluntary production cuts implemented by several OPEC countries.
Despite the handsome crude prices, the possibility of the commodity price hitting $100 per barrel as in 2022 is almost negligible. Also, EIA is expecting a slowdown in GDP growth next year compared to this year. Notably, in 2024, EIA projects GDP growth at 1.3%, lower than its estimated growth rate of 2.4% in 2023.
Thus, a slowdown of economic growth may hurt energy demand, heightening the need to keep an eye on energy players like Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation (CVX - Free Report) and ConocoPhillips (COP - Free Report) , having a strong balance sheet and commendable free cashflow conversions.
3 Stocks to Gain
Chevron and ExxonMobil have strong balance sheets, hence they can withstand adverse business environments. While XOM has a total debt-to-capitalization of 16.6%, the metric for CVX is 11%. Compared to the 24% debt-to-capitalization of composite stocks belonging to the Zacks Oil & Gas Integrated International industry, ExxonMobil and Chevron are better off.
In fact, both the leading integrated energy companies have been consistently witnessing lower debt-to-capitalization ratios than the industry over the past three years, thanks to handsome oil and gas prices that have been aiding the energy majors’ financial positions. ExxonMobil and Chevron also exhibit commendable free cash flow conversions, reflecting their capacity to transform operating profits into free cash flow within a specified timeframe.
Thus, both the energy majors are well poised to gain next year. The Zacks Consensus Estimate for earnings per share (EPS) for ExxonMobil in 2024 is pegged at $9.76, suggesting a year-over-year rise of 6.3%. For Chevron, the Zacks Consensus Estimate for EPS for the next year stands at $15.28, implying a year-over-year improvement of 16.3%.
ConocoPhillips 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 is better positioned to rely on its strong balance sheet to withstand any adverse business scenario. Like Chevron and ExxonMobil, handsome oil prices are also aiding the upstream company’s financials, which will help it continue to witness strong free cash flow conversions.
For ConocoPhillips, the Zacks Consensus Estimate of EPS for the next year is pegged at $11.56, indicating a year-over-year improvement of 27.5%.
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3 Energy Stocks With Fortress Balance Sheet to Gain in 2024
The West Texas Intermediate (WTI) crude oil price is hovering around the $75 per barrel mark and is expected to stay favorable into the coming year. Specifically, the U.S. Energy Information Administration (“EIA”) anticipates WTI oil price of $78.07 per barrel in 2024, slightly surpassing its projected figure of $77.63 for the current year. Contributing to the strength of commodity prices are additional voluntary production cuts implemented by several OPEC countries.
Despite the handsome crude prices, the possibility of the commodity price hitting $100 per barrel as in 2022 is almost negligible. Also, EIA is expecting a slowdown in GDP growth next year compared to this year. Notably, in 2024, EIA projects GDP growth at 1.3%, lower than its estimated growth rate of 2.4% in 2023.
Thus, a slowdown of economic growth may hurt energy demand, heightening the need to keep an eye on energy players like Exxon Mobil Corporation (XOM - Free Report) , Chevron Corporation (CVX - Free Report) and ConocoPhillips (COP - Free Report) , having a strong balance sheet and commendable free cashflow conversions.
3 Stocks to Gain
Chevron and ExxonMobil have strong balance sheets, hence they can withstand adverse business environments. While XOM has a total debt-to-capitalization of 16.6%, the metric for CVX is 11%. Compared to the 24% debt-to-capitalization of composite stocks belonging to the Zacks Oil & Gas Integrated International industry, ExxonMobil and Chevron are better off.
In fact, both the leading integrated energy companies have been consistently witnessing lower debt-to-capitalization ratios than the industry over the past three years, thanks to handsome oil and gas prices that have been aiding the energy majors’ financial positions. ExxonMobil and Chevron also exhibit commendable free cash flow conversions, reflecting their capacity to transform operating profits into free cash flow within a specified timeframe.
Thus, both the energy majors are well poised to gain next year. The Zacks Consensus Estimate for earnings per share (EPS) for ExxonMobil in 2024 is pegged at $9.76, suggesting a year-over-year rise of 6.3%. For Chevron, the Zacks Consensus Estimate for EPS for the next year stands at $15.28, implying a year-over-year improvement of 16.3%.
ConocoPhillips 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 is better positioned to rely on its strong balance sheet to withstand any adverse business scenario. Like Chevron and ExxonMobil, handsome oil prices are also aiding the upstream company’s financials, which will help it continue to witness strong free cash flow conversions.
For ConocoPhillips, the Zacks Consensus Estimate of EPS for the next year is pegged at $11.56, indicating a year-over-year improvement of 27.5%.