With the projections of a steady oil price uptick this year, fueled by rising demand and mounting geopolitical turmoil in the Middle East, the oil and gas industry is well-positioned to display robust resilience. Therefore, investors could consider buying fundamentally strong gas and oil stocks TotalEnergies SE (TTE), BP p.l.c. (BP), and Dorchester Minerals, L.P. (DMLP) now.
OPEC forecasts strong global oil demand growth for 2024 and 2025, with upward revisions in economic growth projections, which could provide additional support to the oil demand. As per the monthly report, oil demand could surge by 2.25 million bpd in 2024 and 1.85 million bpd in 2025, and global economic growth of 2.8% in 2024 and 2.9% in 2025 is projected, buoyed by easing inflation.
Moving forward, oil prices could continue their upward trajectory due to anticipated supply deficits in 2024, arising from OPEC+ cuts, Ukrainian drone attacks on Russian refineries, Red Sea ship incidents, and Federal Reserve rate cut projections, that have historically stimulated demand. Deutsche Bank analysts project Brent crude prices to reach $88 per barrel by the end of 2024.
Furthermore, the oil and gas sector is likely to experience significant growth driven by digital transformation and increased exploratory activities. Advanced technologies ensure efficiency and safety enhancements, which could propel the global oil and gas automation market to $33.34 billion by 2030, growing at a CAGR of 6.7%.
Considering these conducive trends, let's take a look at the fundamentals of the three gas and oil sector stocks.
TotalEnergies SE (TTE)
Headquartered in Courbevoie, France, TTE produces and markets fuels, natural gas, and electricity in France, rest of Europe, North America, Africa, and internationally. It operates through Integrated Gas, Renewables & Power; Exploration & Production; Refining & Chemicals; and Marketing & Services segments.
Recently, TTE acquired 100% of Talos Low Carbon Solutions, an early-mover American company focused on carbon capture and storage. After the transaction is completed, TTE will own a 25% share in the Bayou Bend project alongside Chevron and Equinor.
TTE will also own a 65% operated interest in the Harvest Bend project and a 50% interest in the Coastal Bend project. Because Coastal Bend and Harvest Bend are located farther away from the company’s other existing assets, TTE intends to divest its interest in these two projects after closing.
TTE pays an annual dividend of $3.20 per share, which translates to a dividend yield of 4.68% on the current share price. Its four-year average yield is 6.60%. TTE’s dividend payments have grown at a 2% CAGR over the past five years.
TTE’s trailing-12-month cash from operations of $40.68 billion is significantly higher than the industry average of $679.52 million. Similarly, its trailing-12-month cash per share of $11.59 is significantly higher than the industry average of $1.01.
For the fiscal fourth quarter that ended December 31, 2023, TTE’s sales and adjusted EBITDA stood at $59.24 billion and $11.70 billion, respectively. For the same quarter, its adjusted net income and adjusted earnings per share stood at $5.23 billion and $2.16, respectively.
As of December 31, 2023, TTE’s total current liabilities amounted to $88.79 billion, compared to $109.78 billion as of December 31, 2022.
Street expects TTE’s revenue and EPS for the fiscal year ending December 2024 to be $216.91 billion and $9.04, respectively. The company surpassed consensus revenue estimates in three of the trailing four quarters, which is impressive.
The stock has gained 20.5% over the past year to close the last trading session at $68.40. Over the past nine months, it has gained 17.9%.
TTE’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
The stock has a B grade for Momentum, Stability, and Quality. Within the Energy - Oil & Gas industry, it is ranked #11 out of 83 stocks.
To see additional POWR Ratings for Growth, Value, and Sentiment for TTE, click here.
BP p.l.c. (BP)
Headquartered in London, the United Kingdom, BP provides carbon products and services. The company operates through Gas & Low Carbon Energy; Oil Production & Operations; and Customers & Products segments.
On March 11, BP announced the early tender results for the previously announced cash tender offer by its wholly-owned subsidiary BP Capital Markets p.l.c. to purchase for cash any validly tendered (and not validly withdrawn) and accepted notes up to an aggregate principal amount of $1.3 billion of notes issued by the offeror.
On November 20, 2023, BP completed a major technology upgrade at its Fowler Ridge 1 wind farm in northwest Indiana that enables the site to produce more power, with greater efficiency and reliability.
The new technology produces power more efficiently at lower wind speeds, creating more electricity from available wind resources. This project was a substantial upgrade for the wind farm and another investment in BP's low-carbon energy future.
BP pays an annual dividend of $1.74 per share, which translates to a dividend yield of 4.62% on the current share price. Its four-year average yield is 5.87%. BP’s dividend payments have grown at a 2.7% CAGR over the past three years.
BP’s trailing-12-month cash from operations of $32.04 billion is significantly higher than the industry average of $679.52 million. Its trailing-12-month ROCE and ROTC of 22.12% and 11.53% are 24.5% and 39.6% higher than the industry averages of 17.76% and 8.26%, respectively.
For the fiscal fourth quarter that ended December 31, 2023, BP’s total revenues and other income, and profit before interest and taxation stood at $52.59 billion and $2.08 billion, respectively. Moreover, its adjusted EBITDA stood at $10.57 billion.
For the same quarter, its profit for the period attributable to BP shareholders and profit for the period attributable to BP shareholders per ADS stood at $371 million and $0.13, respectively.
Street expects BP’s revenue and EPS for the fiscal first quarter ending March 2024 to be $56.12 billion and $1.01, respectively.
The stock has gained 7.6% over the past year to close the last trading session at $37.84. Over the past nine months, it has gained 7%.
BP’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to Buy in our proprietary rating system.
BP has a B grade for Momentum, Sentiment, and Quality. Within the A-rated Foreign Oil & Gas industry, it is ranked #16 out of 40 stocks.
Beyond what we’ve stated above, we have also rated the stock for Growth, Value, and Stability. Get all ratings of BP here.
Dorchester Minerals, L.P. (DMLP)
DMLP acquires, owns, and administrates production and nonproduction of natural gas and crude oil royalty, net profit, and leasehold interests in the U.S.
On February 8, DMLP distributed $1.01 per common unit to common unitholders, representing activity for the fourth quarter that ended December 31, 2023. DMLP pays an annual dividend of $4.03 per share, which translates to a dividend yield of 12.27% on the current share price.
DMLP's four-year average yield is 11.08%. Over the past three and five years, its dividend payments have grown at CAGRs of 40.4% and 13.5%, respectively.
DMLP’s trailing-12-month asset turnover ratio of 0.86x is 65.8% higher than the industry average of 0.52x. Its trailing-12-month net income and levered FCF margins of 69.86% and 61.97% are 421.8% and 884.5% higher than the industry averages of 13.39% and 6.29%, respectively.
For the fiscal year that ended December 31, 2023, DMLP’s total operating revenues stood at $163.80 million. For the same year, its net income and net income per common unit stood at $114.12 million and $2.85, respectively.
Moreover, its cash and cash equivalents at end of period increased 15.4% year-over-year to $47.03 million. As of December 31, 2023, DMLP’s total current assets amounted to $69.71 million, compared to $62.47 million as of December 31, 2022.
The stock has gained 23.1% over the past year to close the last trading session at $33.50. Over the past six months, it has gained 16.6%.
DMLP’s POWR Ratings reflect its positive prospects. The stock has an overall B rating, equating to Buy in our proprietary rating system.
DMLP has an A grade for Quality. Within the A-rated MLPs – Oil & Gas industry, it is ranked #7 out of 24 stocks.
Click here for the additional POWR Ratings for DMLP (Growth, Value, Momentum, Stability, and Sentiment).
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TTE shares rose $0.04 (+0.06%) in premarket trading Wednesday. Year-to-date, TTE has gained 2.29%, versus a 8.78% rise in the benchmark S&P 500 index during the same period.
About the Author: Neha Panjwani
From her school days, Neha harbored a profound fascination for finance, a passion that steered her toward a career as an investment analyst following the completion of her bachelor's degree in commerce. Currently enrolled in the CFA program, Neha is dedicated to further enriching her comprehension of investment fundamentals. Neha's primary objective is to aid retail investors in discerning optimal investment opportunities by diligently evaluating crucial aspects of financial instruments, with a primary focus on stocks and ETFs. Her commitment lies in empowering individuals to make informed and strategic investment decisions in the dynamic world of finance.
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