Energy stocks have experienced a significant downturn in the market over the past three months, largely due to the decline in oil prices. However, experts believe that the key to these stocks bouncing back lies in their earnings.
After facing a four-day consecutive drop, crude oil prices are at their lowest point. Nevertheless, the positive outlook for these stocks is anchored in the projected increase in oil and gas earnings throughout 2021 and 2022. As energy demand continues to rebound from Covid restrictions and companies enhance their efficiency, earnings have surged. Unfortunately, this year has proven to be more challenging, with almost all oil and gas companies expecting weaker earnings due to falling commodity prices.
Looking ahead to next year, the outlook is mixed. While most energy companies are expected to report stronger earnings than in 2023, the increases may be modest. Exxon Mobil anticipates a 5% rise in earnings, whereas Chevron is projected to experience a 6% increase.
However, a select few companies have the potential for stellar growth in the coming year, provided commodity prices remain strong. Based on a screening of oil and gas companies with market capitalizations above $5 billion, five names have emerged as having the highest expected earnings growth between 2023 and 2024.
It's worth noting that several of these companies are natural gas producers. Analysts are particularly optimistic about natural gas prices in 2024 due to the anticipated addition of significant liquefied natural gas export capacity in the US by year-end.
According to the Energy Information Administration, natural gas prices are expected to average $3.25 per million British Thermal Units in 2024, up from $2.67 in 2023.
Terminals Expanding Access to Global Natural Gas Markets
Terminals along the Gulf Coast are providing opportunities for natural gas producers to export their product to European and Asian markets. These markets have a high demand for natural gas as they don't produce much of their own. However, there are potential risks involved in this forecast, including delays in facility construction or an oversupply in the LNG market. It's worth noting that countries like Qatar have also been increasing their LNG shipments.
EQT: Leading the Way
As the largest natural gas producer in the United States, EQT holds significant acreage throughout the Appalachia region. The company's stock has seen impressive gains, surging over 20% this year based partly on expectations for 2024. EQT has been assertively pursuing international opportunities and recently entered a deal with a Louisiana plant to convert its gas into LNG for the next 15 years. Now, EQT is ready to forge direct partnerships with international customers.
Antero Resources and Southwestern Energy
Antero Resources and Southwestern Energy, both major players in the natural gas production sector, are also reaping the benefits of the growing export market. Antero, in particular, has seen a notable increase in its production destined for China in the form of propane.
Hess Eyeing Rapid Expansion
Hess is on the verge of experiencing rapid growth due to its involvement in a substantial offshore drilling program near Guyana. Partnering with Exxon on this project, the company anticipates producing hundreds of thousands of barrels of oil per day. Moreover, Hess is likely to become part of Chevron as early as next year, following a recent acquisition agreement.
Civitas Resources: A Rising Star in Oil Production
Colorado-based Civitas Resources, primarily focused on oil production, has been proactively expanding its operations into the Permian Basin located in Texas and New Mexico. The company's production is projected to increase by an impressive 59% next year, exceeding the average growth rate among oil companies. According to FactSet, nine out of ten analysts covering Civitas Resources rate the company as a "Buy."
In conclusion, these prominent players in the natural gas and oil sectors are strategically positioning themselves to capitalize on the expanding global market. With access to key terminals and partnerships with international entities, these companies are well-positioned for success in the coming years.