Oil prices surged above $90 per barrel last week for the first time since October 2023. Brent crude surpassed $91 per barrel on Friday, rising 18% for the year. The recent upward movements over the past two weeks, following a month in a tight range, have been influenced partly by concerns about a possible escalation of conflict in the Middle East.
Given the industry tailwinds, it could be wise to invest in fundamentally sound energy stocks MPLX LP (MPLX), Repsol, S.A. (REPYY), and Martin Midstream Partners L.P. (MMLP) for future solid returns. These stocks are rated A (Strong Buy) in our POWR Ratings system.
According to OPEC, the global oil demand will likely continue to rise over the next two years. The Organization forecasts that world oil demand will increase by 2.25 million barrels per day (bpd) in 2024 and 1.85 million bpd in 2025.
Global oil demand is projected to rise to 1.7 mb/d for the first quarter of 2024, which is at higher-than-expected levels, while world oil production is projected at 870 kb/d for the same period. Oil prices are likely to remain on high ends amid increasing geopolitical risk factors.
According to EIA, the Brent crude oil price averaged $83 per barrel (b) in February, reflecting an increase of $3/b from January. The disruptions caused by attacks targeting commercial ships transiting the Red Sea shipping channel and the anticipated extension to voluntary OPEC+ production cuts now extended through the second quarter of 2024.
U.S. crude oil production again takes the spot of lead global oil production for a sixth straight year, with a new record average production of 12.9 million bpd. Also, in December, U.S. crude oil production set a new monthly record high of more than 13.3 million bpd.
The global oil and gas market is expected to grow at a CAGR of 5.2% during the forecast period (2024-2028), resulting in a market volume of $9.35 trillion by 2028. Key trends driving the market growth are resource exploration and supportive government initiatives.
Moreover, investors’ interest in energy stocks is evident from the iShares Global Energy ETF (IXC) 16% returns over the past three months.
Given the industry’s robust outlook, investing in quality energy stocks such as MPLX, REPYY, and MMLP could be wise for future gains.
MPLX LP (MPLX)
MPLX owns and operates midstream energy infrastructure and logistics assets. The company operates through Logistics and Storage; and Gathering and Processing segments. It engages in the gathering, processing, and transportation of natural gas alongside the gathering, transportation, fractionation, storage, and marketing of natural gas liquids.
On March 26, MPLX, WhiteWater, I Squared, and Enbridge Inc. (ENB) entered a definitive agreement to strategically combine the Whistler Pipeline and Rio Bravo Pipeline project in a newly formed joint venture. MPLX will hold 30.4% ownership in the joint venture. The combined platform will offer significant benefits to the joint venture's customers.
The joint venture will align with MPLX's wellhead-to-water growth strategy, enhancing its natural gas value chain in the Permian basin and South Texas. It will also allow the company to cater to the increasing demand for natural gas through possible future capacity expansions.
On January 24, MPLX’s Board of Directors declared a quarterly cash distribution of $0.85 per common unit for the fourth quarter of 2023. The distribution was paid on February 14, 2024, to common unitholders of record on February 5, 2024.
MPLX pays an annual dividend of $3.40 per unit, which translates to a yield of 8.07% on the current share price. Its four-year average yield is 10.77%. The company’s dividend payouts have grown at a CAGR of 5.7% over the past three years. MPLX has raised its dividends for ten consecutive years.
MPLX’s total revenue and other income increased 11.4% year-over-year to $2.97 billion during the fourth quarter that ended December 31, 2023. Its income from operations grew 29.7% from the year-ago value to $1.37 billion. Net income attributable to MPLX came in at $1.13 billion and $1.10 per limited partner unit, up 39% and 41% year-over-year, respectively.
Furthermore, the company’s adjusted EBITDA rose 11.6% from the year-ago value to $1.62 billion. As of December 31, 2023, its cash and cash equivalents stood at $1.05 billion, compared to $238 million as of December 31, 2022.
Analysts expect MPLX’s revenue and EPS for the first quarter (ended March 2024) to increase 7.1% and 6.5% year-over-year to $2.91 billion and $0.97, respectively. Also, the company has surpassed the consensus EPS estimates in each of the trailing four quarters.
Shares of MPLX have surged 20.1% over the past six months and 21.6% over the past year to close the last trading session at $42.13.
MPLX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
MPLX has a B grade for Quality, Sentiment, Momentum, Stability, and Growth. It is ranked #2 out of 24 stocks in the A-rated MLPs – Oil & Gas industry.
In addition to the POWR Ratings we’ve stated above, we also have other ratings for MPLX. Get all MPLX ratings here.
Repsol, S.A. (REPYY)
Based in Madrid, Spain, REPYY is a global multi-energy company. It operates through three segments: Upstream; Industrial; and Commercial and Renewables. The company engages in the exploration, development, and production of crude oil and natural gas reserves, refining activities, and petrochemicals business.
On April 3, 2024, REPYY commenced large-scale production of renewable fuels in Cartagena, the first plant of its kind in the Iberian Peninsula fully dedicated to producing renewable fuels on an industrial scale. The plant can produce 250,000 tons of renewable fuels annually from waste, such as used cooking oil.
The renewable fuels manufactured in Cartagena will help avoid the emission of 900,000 tons of CO2 annually, increase the use of renewable fuels as an already available alternative, and act as another leap of REPYY in the transformation toward decarbonization with a cutting-edge technological project.
On March 26, REPYY and Bunge Ltd. (BG) partnered to develop new opportunities to help meet the growing demand for lower carbon intensity feedstocks for the production of renewable fuels. It will expand operations as the companies plan to explore other areas to increase potential availability of non-food lipidic feedstocks.
Through this strategic agreement, REPYY acquired 40% of three industrial facilities that are part of Bunge Iberica, Bunge’s subsidiary. The partnership increased REPYY’s access to a broad portfolio of low-carbon intensity feedstocks to produce renewable fuels and reflects its commitment to providing society with solutions to reduce the net CO2 emissions from transport.
During the fourth quarter that ended December 31, 2023, REPYY reported revenue from operating activities of €15.51 billion ($16.81 billion). Its adjusted income increased 8.8% from the prior quarter to €1.19 billion ($1.29 billion), of which its adjusted income from the upstream segment grew 62.5% over the same period to €554 million ($600.26 million).
In addition, the company’s net income and EPS came in at €383 million ($414.98 million) and €0.30 for the quarter, respectively. Its operating cash flow rose 72.9% from the previous quarter to €2.24 billion ($2.43 billion).
Over the past six months, REPYY’s stock has gained 15.1% and 13.7% over the past year to close the last trading session at $17.56.
REPYY’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
The stock has a B grade for Value, Momentum, Sentiment, and Stability. Within the A-rated Foreign – Oil & Gas industry, REPYY is ranked #4 of 40 stocks.
Click here to access additional ratings of REPYY for Growth and Quality.
Martin Midstream Partners L.P. (MMLP)
MMLP offers terminalling, processing, storage, and packaging services for petroleum products and by-products. It operates through four segments: Terminalling and Storage; Transportation; Sulfur Services; and Specialty Products.
On January 23, MMLP declared a quarterly cash distribution of $0.005 per unit for the fourth quarter of 2023. The distribution was paid on February 14, 2024, to common unitholders of record as of the close of business on February 7, 2024.
MMLP pays an annual distribution of $0.02 per unit, which translates to a yield of 0.75% on the current share price. Its four-year average yield is 5.63%.
In terms of forward EV/Sales, MMLP is trading at 0.77x, 63.2% lower than the industry average of 2.11x. Further, the stock’s forward EV/EBITDA multiple of 5.08 is 14.9% lower than the industry average of 5.97. Likewise, its forward Price/Sales of 0.14x is considerably lower than the industry average of 1.54x.
During the fiscal year that ended December 31, 2023, MMLP posted total revenues of $797.96 million, of which its revenues from Terminalling and storage segment increased 7.9% year-over-year to $86.51 million. Its operating income grew 30.2% from the prior year to $66.72 million. Its EBITDA came in at $111.55 million, up 3.7% year-over-year.
Analysts expect MMLP’s revenue for the fiscal year (ending December 2025) to increase 2.9% year-over-year to $779.64 million. The consensus EPS estimate for the same period of $0.23 indicates a 109.1% year-over-year growth.
MMLP’s stock has surged 6% over the past month and 7.3% over the past six months to close the last trading session at $2.66.
MMLP’s POWR Ratings reflect its bright prospects. The stock has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
MMLP has an A grade for Sentiment and a B for Growth, Value, Momentum and Quality. The stock has topped among 24 stocks in the A-rated MLPs – Oil & Gas industry.
To access MMLP’s other ratings, click here.
What To Do Next?
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MPLX shares were trading at $42.27 per share on Monday morning, up $0.14 (+0.33%). Year-to-date, MPLX has gained 17.69%, versus a 9.48% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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