Amid the concerning market conditions caused by the Middle East tensions, crude oil prices are projected to hike strongly in the coming period. This is due to the current supply deficit and increasing withdrawals from oil inventories, pushing prices to record levels and causing high volatility and uncertainties.

Given the industry tailwinds, it could be wise to buy fundamentally solid oil stocks Enterprise Products Partners L.P. (EPD), Marathon Oil Corporation (MRO), and Plains All American Pipeline, L.P. (PAA) with high upside potential.

The Organization of Petroleum Exporting Countries (OPEC) maintained its bullish view on global oil demand growth in its recent World Oil Outlook for 2024, forecasting robust growth as far ahead as 2050. The oil producer group predicted strong energy demand growth of 24% globally between 2024 and 2050.

The organization also forecasted robust medium-term growth in oil demand, totaling over 112.3 million barrels per day in 2029, indicating an increase of 10.1 million barrels per day as compared to 2023.

This indication was further supported by predictions from the U.S. Energy Information Administration (EIA) on global oil demand. According to EIA, demand will expand at a higher pace, reaching new record levels this year. The ongoing supply restraints will result in increased withdrawals of oil from global stockpiles, likely to further Brent crude prices back above $80 a barrel.

Besides, concerns over declines in oil inventories and OPEC+ members’ decision to delay production increases until December 2024 are majorly affecting the market. The Brent spot price increased to $79/b on October 4, reflecting a surge of 11% from a week earlier.

Given the industry’s bright prospects, investing in fundamentally strong energy stocks EPD, MRO, and PAA could be wise.

Let’s discuss the fundamentals of these stocks in detail:

Enterprise Products Partners L.P. (EPD)

EPD provides midstream energy services to producers and consumers of natural gas, natural gas liquids (NGLs), crude oil, petrochemicals, and refined products. The company operates through four segments: NGL Pipelines & Services; Crude Oil Pipelines & Services; Natural Gas Pipelines & Services; and Petrochemical & Refined Products Services.

On October 29, EPD announced the completion of the second phase of its Texas Western Products system. Located in Grand County, Utah, the facility is a refined products truck terminal serving the Grand Junction, Colorado, and Moab, Utah, areas. It has a storage capacity of 400,000 barrels for gasoline and diesel and can load trucks at a rate of up to 20,000 bpd.

On October 28, EPD completed its previously announced acquisition of Piñon Midstream, LLC. EPD purchased Piñon Midstream for $950 million in cash consideration as part of a debt-free transaction.

The assets acquired under the transaction, including natural gas gathering and treating services, will expand EPD’s footprint in the eastern flank of the prolific Delaware Basin of Texas and New Mexico.

During the third quarter of 2024, which ended on September 30, 2024, EPD’s total revenues increased 14.8% year-over-year to $13.78 billion. Its operating income rose 5% year-over-year to $1.78 billion. The company’s net income attributable to common unitholders amounted to $1.42 billion or $0.65 per unit, up 7.5% and 8.3% from the prior year’s quarter, respectively.

Furthermore, the company’s adjusted EBITDA rose 4.9% from the year-ago value to $2.44 billion.

The consensus revenue estimate of $14.85 billion for the first quarter (ending March 2025) represents a 0.6% increase year-over-year. The consensus EPS estimate of $0.70 for the same quarter indicates a 3.8% improvement year-over-year. Moreover, the company surpassed the consensus revenue estimates in three of the trailing four quarters.

EPD’s stock has gained 1.9% over the past six months and 10.2% over the past year to close the last trading session at $29.14. Wall Street analysts expect the stock to hit $34 in the near term, indicating a potential upside of 16.80%.

EPD’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

EPD has a B grade for Growth, Value, Momentum, and Stability. It is ranked #6 out of 23 stocks in the A-rated MLPs – Oil & Gas industry.

In addition to the POWR Ratings we’ve stated above, we also have EPD ratings for Sentiment and Quality. Get all EPD ratings here.

Marathon Oil Corporation (MRO)

MRO is an independent exploration and production company that engages in international exploration, production, and marketing of crude oil and condensate, natural gas liquids, and natural gas. It also produces and markets products manufactured from natural gas, like liquefied natural gas and methanol.

On August 29, MRO received the necessary stockholder approval for its pending merger with ConocoPhillips (COP). The companies will continue the transaction to close late in the fourth quarter of 2024.

On July 31, MRO’s Board of Directors declared a dividend of $0.11 per share on the company’s common stock. The dividend was paid on September 10, 2024, to stockholders of record on August 21, 2024.

MRO’s annual dividend of $0.44 translates to a yield of 1.69% at the current share price. Its four-year average dividend yield is 1.25%. And the company’s dividend payouts have increased at a CAGR of 43.2% over the past three years.

During the second quarter that ended June 30, 2024, MRO’s total revenues and other income increased 12.8% year-over-year to $1.71 billion. Its income from operations grew 15.2% from the year-ago value to $523 million. The company’s adjusted net income came in at $357 million and $0.63 per share, up 21% and 31.2% from the prior year’s quarter, respectively.

Also, the company’s adjusted free cash flow was $364 million for the period.

Analysts expect MRO’s revenue and EPS for the first quarter (ending March 2025) to grow 5% and 2.7% year-over-year to $1.63 billion and $0.56, respectively. Also, the company topped the consensus EPS estimates in three of the four trailing quarters.

Shares of MRO have plunged 6.6% over the past six months to close the last trading session at $16.93. Wall Street analysts expect the stock to hit $30.54 in the near term, indicating a potential upside of 17.69%.

MRO’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has a B grade for Quality. Within the Energy – Oil & Gas industry, MRO is ranked #21 on the list of 81 stocks.

Click here to access additional ratings of MRO for Sentiment, Growth, Value, Momentum, and Stability.

Plains All American Pipeline, L.P. (PAA)

PAA engages in the pipeline transportation, terminaling, storage, and gathering crude oil and natural gas liquids (NGL). The company operates through two segments: Crude Oil and NGL.

On October 2, PAA and Plains GP Holdings (PAGP) announced their quarterly distributions for the third quarter of 2024 in the following manner: PAA Common Units – $0.32 per unit, PAGP class A shares – $0.32 per share, PAA series A preferred units – $0.61 per unit, and PAA series B preferred units - $24.25 per unit.

PAA pays an annual distribution of $1.27, which translates to a yield of 7.58% at the current share price. Its four-year average dividend yield is 7.26%. Moreover, the company’s dividend payouts have increased at a CAGR of 19.2% over the past three years.

PAA’s revenues increased 11.5% year-over-year to $12.93 billion for the second quarter that ended June 30, 2024. Adjusted net income attributable to PAA was $288 million, or $0.31 per common unit, indicating increases of 18.5% and 24% from the prior year’s quarter, respectively.

In addition, the company’s adjusted EBITDA rose 15.3% year-over-year to $807 million.

Analysts expect PAA’s revenue for the third quarter (ended September 2024) to increase 8.3% year-over-year to $13.07 billion. The company’s revenue for the fiscal year 2024 is expected to increase 6.1% year-over-year to $51.70 billion. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.

PAA’s stock has surged 12.4% over the past year to close the last trading session at $16.76. Wall Street analysts expect the stock to hit $19.14 in the near term, indicating a potential upside of 15.14%.

PAA’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

It has an A grade for Growth. It also has a B grade for Value, Momentum, and Stability. PAA is ranked #5 among 23 stocks in the A-rated MLPs – Oil & Gas industry.

Click here to access PAA’s ratings for Sentiment and Quality.

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EPD shares rose $0.07 (+0.24%) in after-hours trading Tuesday. Year-to-date, EPD has gained 16.65%, versus a 23.55% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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