3 Oil Stocks That Beat the Global Market in 2022 by The Motley Fool
© Reuters 3 oil stocks that beat the global market in 2022
The TSX energy sector was the worst performer in 2020, losing 30.8% due to the significant decline in oil demand and the global pandemic. Fast forward to 2022, and the fortunes of oil stocks have changed. The gain since the start of the year is now 65.14%, an overwhelming lead over materials (+8.30%), the second best performer.
Athabasca Oil (:ATH), Obsidian Energy (TSX:OBE)(NYSE:OBE) and Ensign Energy Services (TSX:ESI) lost big in 2020, but beat the broader market this year. All three posted gains of more than 100% against -2.23% on the TSX. Their stock prices could skyrocket further if commodity prices remain high.
Athabasca’s record free cash flow dipped to $0.11 at the end of April 2020, but trades at $2.56 per share today, 334% higher than a year ago. The gain since the beginning of the year is 115.13%. This $1.37 billion energy company is developing thermal and light oil assets on a large land base in the Western Canadian Sedimentary Basin.
The increase in cash flows reflects the rebound of oil players. In the first quarter of 2022, Athabasca reported record free cash flow of $43.83 million. Adjusted cash flow also increased 294% to $74.76 million from the first quarter of 2021. You can expect Athabasca’s cash flow expansion to continue through 2023.
According to management, the transition from corporate value to shareholders is materializing and should unlock significant value for shareholders. Once Athabasca has reached its leverage target, it commits to using FCF and cash balances for share buybacks or dividends. Additionally, management said the current stock price does not reflect the stock’s tremendous intrinsic value.
Making a splash Obsidian Energy is causing a stir in 2022, thanks to its return of 131.09% since the beginning of the year. Additionally, at $12.04 per share, the one-year price return is 499%. The $988.21 million company is one of Canada’s mid-sized oil and gas producers. According to management, Obsidian has re-emerged stronger, leaner, and more capable than ever as he navigates an exciting new path.
In the first quarter of 2022, total production increased by 27% to 29,407 barrels of oil equivalent per day (boe/d) compared to the first quarter of 2021. More importantly, the net selling price increased by 69% from year over year to reach $70.49. While net income rose only 3% from the same quarter last year, cash flow from operating activities jumped 195% to $83.9 million.
Management attributes the significant production growth to the success of Obsidian’s development program in the first half of 2022. The company is finalizing its plans for the second half as it capitalizes on the current high commodity price environment.
High Flyer Ensign Energy is neither an oil company nor a producer, but provides oil services to the Canada and natural gas industries. In terms of performance, this energy stock (+188.1%) has outperformed Athabasca and Obsidian since the start of the year. The stock price is $4.84, while the one-year price return is 275.89%.
The $787 million company reported a profit of $6.6 million in the first quarter of 2022, compared to a net loss of $43.6 million in the first quarter of 2021. Notably, Ensign’s revenue jumped 52 % year over year to reach $332.7 million. According to market analysts’ 12-month forecast, the potential return is between 20% and 45%.
Capital Gains Athabasca, Obsidian and Ensign don’t pay dividends, but who needs a dividend if capital gains can more than make up for their absence?
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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in the stocks mentioned.
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