Rejuvenate Your Portfolio With These 3 Energy Stocks in 2H23
Extreme commodity price volatility is inherent in almost every energy player, which might deter investors from allocating money to the energy space. Despite the choppiness and uncertainty, there is plenty of room to earn profit in the second half of 2023, if one could identify prospective stocks in the sector. Three such stocks with substantial upside potential are Cheniere Energy Partners LP CQP, Transportadora de Gas del Sur SA TGS and Civitas Resources, Inc. CIVI
Oil Price to Remain Favorable
Currently, oil is trading at more than the $70-per-barrel mark, reflecting a handsome pricing environment. The prices will likely remain favorable for the rest of the year.
With the early last month's announcement of OPEC+ about the extension of the crude oil production cut through 2024, there could be a slight fall in worldwide crude inventories in each of the next five quarters, per the U.S. Energy Information Administration (“EIA”). This might push oil price higher, possibly by the latter part of this year, said EIA. This is reflected in EIA’s projection for the average spot Brent oil price at $79 per barrel for the second half of this year.
Thus, it is quite probable that the worldwide exploration and production business will likely remain good for the rest of this year on promising oil prices. Rising consumption of liquids fuels across the globe will also back upstream businesses.
Midstream’s Fee-based Revenues, Rising US LNG Export
Like upstream, midstream operations will remain in the spotlight in the second half of this year. This is because stocks in the midstream space have lower exposure to volatility in commodity prices, thereby securing stable fee-based revenues since the transportation and storage assets are being booked by shippers for the long term. Thus, their business model is relatively stable, which indicates a considerably lower vulnerability to oil and gas prices and volume risks.
Per EIA, U.S. LNG export this year will likely be 12.07 billion cubic feet per day. This suggests an improvement from 10.59 billion cubic feet per day last year. Thus, increasing export volumes will benefit companies having ownership interests in natural gas liquefaction facilities and exporting LNG.
3 Stocks to Buy
Considering these developments, investors should invest in energy stocks to rejuvenate their portfolios in the second half of 2023. Employing our proprietary stock screener, we have zeroed in on three stocks, carrying a Zacks Rank #1 (Strong Buy) or #2 (Buy) presently and a VGM Score of A. Moreover, the companies have witnessed favorable earnings estimate revisions for the current year.
Our research shows that stocks with a VGM Score of A, when combined with a Zacks Rank #1 or 2, offer the best investment opportunities for investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cheniere Energy Partners LP: It has a stable business model, backed by long-term take-or-pay contracts with investment grade off-takers. Owning natural gas liquefaction facilities with six liquefaction Trains, Cheniere Energy secures stable cashflows. The total production capacity of facilities at the Sabine Pass LNG terminal in Cameron Parish, Louisiana (SPL Project) is 30 million tonnes of LNG every year. Cheniere Energy also has an expansion project adjacent to the SPL project, securing additional cashflows. The expansion development will likely comprise up to three natural gas liquefaction trains. Following the positive developments, the #2 Ranked stock has witnessed upward earnings estimate revisions, for 2023, over the past 60 days.
Transportadora: Transportadora’s midstream asset portfolio has the most extensive natural gas pipeline network in Latin America. It generates stable fee-based revenues since its pipeline assets transport more than 60% of the gas consumed in Argentina.
Transportadora has witnessed upward estimate revisions for its 2023 bottom line in the past 60 days. The upward revisions are backed by its stable business model and a strong focus on creating differential shareholder value. Also, Zacks #1 Ranked TGS has lower debt exposure than the composite stocks belonging to the industry.
Civitas Resources: Civitasis a leading carbon-neutral oil and gas producer. Last month, CIVI inked two definitive deals to acquire oil-producing prolific properties in the Midland and Delaware Basins of west Texas and New Mexico. Civitas, with a Zacks Rank of 1, expects these agreements to be highly accretive and has witnessed upward earnings estimate revisions for 2023 over the past 30 days.
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Cheniere Energy Partners, LP (CQP) : Free Stock Analysis Report
Transportadora De Gas Sa Ord B (TGS) : Free Stock Analysis Report
Civitas Resources, Inc. (CIVI) : Free Stock Analysis Report
