Global oil and gas industry prospects appears promising, with demand in developing economies across the globe and geopolitical tensions stirring prices constantly. Also, the growing population worldwide, urbanization, and expanding use of oil and gas are opening new opportunities for market growth.

Against this backdrop, it could be wise to invest in fundamentally strong oil & gas stocks Schlumberger Limited (SLB), Cenovus Energy Inc. (CVE), and APA Corporation (APA) poised for solid upside.

Recently, the OPEC launched its 2024 OPEC World Oil Outlook (WOO). Under the publication, the timeframe has been extended to 2050, where energy demand is set to increase by 24%, and oil demand is expected to reach 120.1 million barrels a day by the end of the forecast period.

According to Reuters, the raised forecast for world oil demand in the medium and long term is driven by developing world growth led by India, Africa, and the Middle East and a slower shift to electric vehicles and cleaner fuels.

Also, in the first half of 2024, the natural gas market grew at a rate above the historical average. The demand in the market was primarily fueled by higher gas use in industry and is increasingly concentrated in Asia. With geopolitical tensions increasing price volatility, natural gas demand is forecast to grow 2.5% in 2024, driven by fast-growing Asian markets.

In the second quarter, a total of 240 deals were announced, having a disclosed value of $67 billion, representing strong global oil and gas M&A activities.

Besides, the Brent crude oil spot price averaged $82 per barrel (b) during August. This marked the eighth consecutive month where the prices averaged between $80/b and $90/b. Also, the EIA further expects prices to rise and remain in a high range owing to the ongoing withdrawals from global oil inventories stemming from OPEC+ production cuts.

Considering the encouraging industry trends, let’s delve into the fundamentals of solid oil & gas stocks such as SLB, CVE, and APA.

Schlumberger Limited (SLB)

SLB engages in the provision of technology for the energy industry globally. The company operates through four divisions: Digital & Integration, Reservoir Performance, Well Construction, and Production Systems. It offers field development and hydrocarbon production, carbon management, and integration of adjacent energy systems.

On September 19, SLB and NVIDIA collaborated to develop generative AI solutions for the energy industry. The strategic collaboration accelerates the development and deployment of industry-specific generative AI foundation models across SLB’s global platforms, including its Delfi™ digital platform and Lumi™ data and AI platform, by leveraging NVIDIA NeMo™.

On September 17, SLB launched the Lumi™ data and AI platform, which integrates advanced artificial intelligence (AI) capabilities, including generative AI with workflows across the energy value chain. The platform accelerates advanced data and AI capabilities at scale for the company’s customers across the energy industry.

During the second quarter that ended June 30, 2024, SLB’s revenue increased 12.8% year-over-year to $9.14 billion. The company’s income before taxes grew 9.9% from the year-ago value to $1.42 billion. Net income attributable to SLB and EPS came in at $1.11 billion and $0.77, up 7.6% and 6.9% from the prior year’s quarter, respectively.

Furthermore, the company’s adjusted EBITDA rose 16.6% year-over-year to $2.29 billion.

Analysts expect SLB’s EPS for the third quarter (ending September 2024) to grow 14.7% year-over-year to $0.89, while its revenue of $9.35 billion for the same period indicates a 12.6% improvement year-over-year. Moreover, the company topped the consensus EPS estimates in all four trailing quarters.

Shares of SLB have decreased 10.5% over the past month to close the last trading session at $41.17. Wall Street analysts expect the stock to hit $65.77 in the near term, indicating a potential upside of 59.75%.

SLB’s solid fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

SLB has a B grade for Growth. It is ranked #20 out of 49 stocks in the Energy - Services industry.

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

Cenovus Energy Inc. (CVE)

Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products in Canada and internationally. The company operates in Oil Sands; Conventional; Offshore; Canadian Refining; and U.S. Refining segments.

On August 1, CVE's Board of Directors declared a quarterly base dividend of $0.18 per common share, payable on September 27, 2024, to shareholders of record as of September 13, 2024.

The Board also declared a quarterly dividend on each of the cumulative redeemable first preferred shares. The dividend is as follows: $0.16 on Series 1, $0.41 on Series 2, $0.29 on Series 3, $0.29 on Series 5, and $0.25 on Series 7, to be paid on October 1, 2024 to shareholders of record as of September 13, 2024.

CVE’s annual dividend of $0.63 translates to a yield of 3.72% at the current share price. Its four-year average dividend yield is 1.45%. Further, the company’s dividend payouts have increased at a CAGR of 123.5% over the past three years.

During the second quarter that ended June 30, 2024, CVE’s revenues increased 21.7% year-over-year to C$14.88 billion ($11.04 billion). Its net earnings came in at C$1.00 billion ($742.26 million) and C$0.53 per share, up 15.5% and 20.4% from the prior year’s quarter, respectively.

In addition, its adjusted funds flow rose 24.3% and 28.6% year-over-year to C$2.36 billion ($1.75 billion) and C$1.26 per share, respectively. The company’s total assets stood at C$56 billion ($41.57 billion) as of June 30, 2024, compared to C$53.91 billion ($40.15 billion) as of December 31, 2023.

As per the company’s revised 2024 corporate guidance, CVE expects total upstream production between 785,000 BOE/d and 810,000 BOE/d, up 7,500 BOE/d at the midpoint. Its total downstream throughput is expected to be 640,000 bbls/d to 670,000 bbls/d, which is up by 5,000 bbls/d at the midpoint.

Street expects CVE’s revenue and EPS for the fourth quarter (ending December 2024) to increase 8% and 118.3% year-over-year to $10.53 billion and $0.60, respectively. Furthermore, the company surpassed the consensus revenue estimates in three of the trailing four quarters.

CVE’s stock has declined 16.6% over the past month to close the last trading session at $16.29. Wall Street analysts expect the stock to hit $24.36 in the near term, indicating a potential 49.54% upside.

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

The stock has an A grade for Quality. CVE is ranked #13 among 81 stocks in the Energy – Oil & Gas industry.

Click here to access CVE’s ratings for Value, Momentum, Growth, Stability, and Sentiment.

APA Corporation (APA)

APA is an independent energy company that explores, develops, and produces natural gas, crude oil, and natural gas liquids. The company has oil and gas operations in the United States, Egypt, and the North Sea. It also has exploration and appraisal activities in Suriname, and holds interests in projects located in Uruguay and internationally.

On September 25, APA and Palantir Technologies Inc. (PLTR), a leading builder of artificial intelligence systems, expanded their partnership through a multi-year, multi-million-dollar enterprise agreement, which was initially signed in 2021.

The agreement is built on the work deployed across APA's global portfolio over the past three years, and it introduces new artificial intelligence capabilities through Palantir's Artificial Intelligence Platform (AIP) software. This collaboration will improve operational efficiency and business visibility across APA’s global portfolio.

Also, on April 1, APA acquired Callon Petroleum Company (CPE). The strategic acquisition bodes well with APA’s operations as Callon’s assets bring scale to its Delaware position and balance its overall Permian asset base.

APA’s total revenues came in at $2.54 billion during the second quarter that ended June 30, 2024, indicating a 41.6% year-over-year growth. The company’s adjusted earnings were $434 million and $1.17 per share, up 64.4% and 37.6% from the prior year’s quarter, respectively. Also, its adjusted EBITDAX increased 29.5% year-over-year to $1.58 billion.

As of June 30, 2024, APA’s total assets stood at $20.19 billion, compared to $15.24 billion as of December 31, 2023.

Street expects APA’s revenue for the first quarter (ending March 2025) to increase 19.4% year-over-year to $2.27 billion, and its EPS for the same quarter is expected to grow 27.2% year-over-year to $0.99. Also, its revenue and EPS for the fiscal year 2025 are expected to increase 0.2% and 5.2% year-over-year to $9.25 billion and $4.36, respectively.

APA’s stock has plunged 20.1% over the past month to close the last trading session at $23.15. Wall Street analysts expect the stock to hit $34.89 in the near term, indicating a potential upside of 50.7%.

APA’s POWR Ratings reflect its robust outlook. The stock has a B grade for Value and Quality. Within the Energy – Oil & Gas industry, APA is ranked #26 among the 81 stocks.

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

What To Do Next?

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SLB shares were trading at $42.29 per share on Friday afternoon, up $1.12 (+2.72%). Year-to-date, SLB has declined -17.21%, versus a 21.35% 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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