Fittingly, gold stocks have been hot since St. Patrick’s Day. But there’s one pot of gold that’s even bigger. 

Oil & gas producers are up more than 15% since March 17th, outshining all other industry groups. The run has breathed new life into an energy sector that dominated in 2022 but has lagged in 2023. 

Not surprisingly, the recent oil stock gush is mostly about oil prices. After hitting a 52-week low of $66.53 on St. Patty’s Day, it’s been mostly green for WTI crude futures. 

In the tug-of-war between oil supply and demand, supply concerns are winning. Looming supply cuts from Saudi Arabia and other OPEC+ nations have the market anticipating lower crude inventories ahead. They are outweighing worries that inflation, interest rate hikes and slowing economic growth will dampen global fuel demand. As a result, WTI crude is back above $80 and on pace for a fourth straight weekly advance.

While this is worrisome for summer travelers bracing for a potential gasoline spike, it is good news for U.S. oil producers who are benefiting from better realized sales prices. The timing is good too — oil & gas companies are getting set to report first quarter earnings and update their full-year outlooks. 

The sharp rebound in crude has fueled solid rebounds from multi-month lows for these three stocks. Is there more in the tank?

What Makes Marathon Oil an Intriguing Earnings Play? 

Marathon Oil Corp. (NYSE: MRO) is up over 25% from a nine-month low of $20.57. Like several E&P peers, the stock gapped up on April 3rd when Saudi Arabia and others announced a plan to slash production by 1.15 million barrels a day beginning next month. With the key producers planning to maintain this pace for the rest of the year, oil spiked more than 6%. 

Although the price of oil trended lower in Q1, Marathon’s outlook for the remainder of the year will be in focus when the company reports on May 3rd. It will be coming off a Q4 earnings per share (EPS) beat that benefited from an aggressive buyback program. Although total profits were down, profits per share were up because company repurchases reduced the share count by 18%. Combined with a recently increased dividend, this makes Marathon one of the more shareholder-friendly oil plays.

Wall Street is projecting 27% lower EPS for Q1 but given Marathon’s rich earnings beat history, the final tally may not be as bad. And with consensus forecasts for future quarters trending higher for the next three quarters, the market may be reminded that oil stock investing is not a sprint, but a marathon. 

Are APA Corp. Shares Undervalued?

Back above $40, APA Corp. (NASDAQ: APA) is recovering from an eight-month low of $30.92 and its first four-month losing streak since 2017. Like Marathon, the company bought a boatload of its own stock to spur EPS growth when oil retreated in the back half of 2022. But unlike Marathon, it still missed the Street’s estimate for the third time in five quarters.

The Apache Corp. parent has one of the more unique oilfield footprints in the industry with assets in the U.S., U.K. and Egypt. This is attractive to some investors, but to others, not enough to overcome a heavy debt burden. Debt comprises over 80% of APA’s capital structure compared to a 25% industry average. Theoretically, this makes it harder for the company to obtain additional capital at favorable rates, especially in a rising rate environment. 

APA bulls have been able to overlook the debt issue, however, in sending the stock on a 30% run. Part of the reason is a 5x trailing P/E ratio which ranks among the lowest in the space. We’ll learn more about APA’s future earnings prospects from its May 3rd update. 

Is ConocoPhillips Stock Fundamentally Sound?

The biggest of oil producers are on the move as well — and that includes ConocoPhillips (NYSE: COP), up approximately 17% from an eight-month low. With vast acreage in the oil-rich Eagle Ford, Permian and Bakken regions, the company has perhaps the most attractive portfolio in the industry. Its growth opportunities are especially large in the Bakken shale formation, where it has roughly 750 undrilled sites that could translate to massive oil reserves.

Rebounding oil prices are particularly positive for ConocoPhillips because it plans to increase production this year. At the midpoint, management’s production guidance implies a 2.2% increase in daily production. If crude can continue to trend higher, the low-cost producer stands to deliver above-industry profit margins. 

ConocoPhillips may be the better fit for conservative investors that prefer a bigger name, strong balance sheet and stable dividend. In contrast to APA Corp., its debt-to-capital ratio is a manageable 26%. The dividend yield is a modest 1.9% but with the payout ratio under 20%, future dividend growth is all but certain. The magnitude of the stock’s rise from its recent low probably won’t be as much as lower-priced peers, but the fundamentals are second to none.