4 Top Oil Stocks for Impressive Returns in H2 2021
Energy companies have rebounded from last year when the coronavirus pandemic massively hit global oil demand. Economies are now reopening with more people socializing and going to work, improving the outlook for fuel demand. This has bolstered optimism about significant earnings generations from oil players in the second half of this year.
Rise in the price of oil
The price of West Texas Intermediate (WTI) crude, which is trading at over $70 a barrel, has improved significantly since the April 2020 pandemic, when oil was in negative territory. With the massive deployment of the coronavirus vaccine, fuel demand is expected to improve further. This paved the way for a greater recovery in the price of oil.
Recently, the price of WTI crude briefly touched its highest level in six years and then pulled back. Commodity price volatility signifies tensions within the OPEC cartel as there are opportunities for some producers in the bloc to restart production in the coming months. However, volatility will not be a headwind. Notably, many analysts expect the cartel to reach an agreement to gradually increase production in the coming months, as higher production will match the rising level of global consumption.
In particular, the US Energy Information Administration (“EIA”) expects a relatively balanced oil market for the second half of this year. Indeed, the increased production will halt the continued drawdown in the global crude oil inventory, the EIA added.
Impressive earnings outlook
Soaring demand for fuel in the United States and other developed economies is improving earnings prospects for energy companies. According to the Zacks Earnings Trends report, the energy sector will likely generate earnings of $17.8 billion and $16.7 billion respectively in the third and fourth quarters of 2021, suggesting massive improvements over the quarters comparable to the previous year.
Image source: Zacks Investment Research
Thus, most analysts predict that the recovery in fuel demand will continue during the July-December period. Notably, the momentum started from the start of 2021 when countries started to build up their arsenals of coronavirus vaccines to defeat the pandemic. In the quarter to the end of March this year, the energy sector generated profits of $10.7 billion, compared to $8.6 billion in the year-ago quarter. In addition, the energy sector is expected to generate $15 billion in profits in the quarter to the end of June this year, after posting losses of $9.6 billion in the third quarter. ‘last year.
4 actions in the spotlight
Considering the context where the energy sector is recovering and is on the verge of generating significant profits in the second half; this would be a good time for investors to include oil stocks in their portfolio. We used our proprietary stock analyzer to eliminate four oil stocks. The companies currently sport a Zacks #1 (Strong Buy) ranking and are expected to generate impressive earnings in Q3 and 2021. You can see the full list of today’s Zacks #1 Rank stocks here.
Continental Resources, Inc. CLR is one of the largest crude producers in the United States and, therefore, is well positioned to profit from rising oil prices. Notably, the company has a strong presence in the heart of a prolific oil field – the Bakken area of North Dakota and Montana.
Along with announcing its first quarter results, the company said it expects to generate $3.1 billion in operating cash flow and $1.7 billion in free cash flow for this year. , given the price of WTI crude at $60 a barrel. Projections suggest a significant year-over-year improvement from operating cash flow of $1.4 billion and free cash flow of $275 million last year.
The stock has seen upward revisions to earnings estimates for the third quarter and 2021 over the past seven days.
Oasis Petroleum Inc. OAS has positioned itself exclusively in the Williston Basin, following the sale of its Permian assets. Given the robust lifespan of inventory and the scale and size of its operations, the company expects significant value creations for its shareholders.
Notably, over the past seven days, the stock has seen upward revisions to earnings estimates for the third quarter and 2021.
Earthstone Energy, Inc. ESTE is a premier upstream company, with a footprint in the heart of West Texas’ Midland Basin and South Texas’ Eagle Ford Trend. By covering 88% of 2021 oil production, the company is not significantly exposed to commodity price volatility.
Over the past seven days, the stock has seen upward revisions to earnings estimates for the third quarter and 2021.
Based in Dallas, TX, Matador Resource Company MTDR has a strong footprint in the liquid-rich Wolfcamp and Bone Spring areas of the Delaware Basin. The company is expected to see earnings growth of 560% and 366% in the third quarter and 2021, respectively.
The infrastructure stock boom will sweep America
A massive push to rebuild America’s crumbling infrastructure will soon be underway. It is bipartisan, urgent and inevitable. Billions will be spent. Fortunes will be made.
The only question is “Are you going to get into good stocks early when their growth potential is greatest?”
Zacks released a special report to help you do just that, and today it’s free. Discover 7 special companies looking to make the most of building and repairing roads, bridges and buildings, as well as transporting goods and transforming energy on a scale almost unimaginable.
Download FREE: How to Leverage Trillions of Dollars in Infrastructure Spending >>
Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report
Continental Resources, Inc. (CLR): Free Stock Analysis Report
Oasis Petroleum Inc. (OAS): Free Inventory Analysis Report
Matador Resources Company (MTDR): Free Stock Analysis Report
Earthstone Energy, Inc. (ESTE): Free Stock Analysis Report
To read this article on Zacks.com, click here.
Zacks Investment Research