Energy Business

5 Jefferies Energy Franchise Picks to Buy for the Rest of 2018

Golar LNG

This is the premier company in the world for LNG distribution. Golar LNG Ltd. (NASDAQ: GLNG) is one of the world’s largest independent owners and operators of LNG carriers and floating storage and regas units (FSRUs). The company has 14 vessels in its fleet, three LNG carriers slated for floating LNG platform (FLNG) conversion, 10 LNG carriers and one FSRU.

Collectively with Golar Partners and Golar Power, the fleet has 16 LNG carriers, three FLNGs/candidates and eight FSRUs. GLNG is the general partner for Golar LNG Partners. Its joint ventures, Golar Power and OneLNG, are focused on FSRU conversions and FLNG projects.

The $40 Jefferies price target compares with the posted consensus price objective of $36.06. The stock traded at $27.80.

Marathon Petroleum

With a big deal in place, this company is poised to be the biggest refinery in the United States. Marathon Petroleum Corp. (NYSE: MPC) is one of the newest members of the Jefferies Franchise List, and it is at the beginning of the long process of completing a massive purchase of another refining giant. The company agreed to buy rival Andeavor for $23.3 billion in the biggest-ever deal for an oil refiner.

The offer, payable in either cash or shares, values Andeavor at about $152.27 a share. That represents a 24% premium over the closing price the prior to the announcement. Following the deal, Marathon will be the largest operator of refining capacity in the United States, and most on Wall Street believe that management can achieve the $1 billion in synergies it has suggested.

Shareholders are paid a 2.56% dividend. Jefferies has set its price target at $95 a share. The posted consensus target is $97.62, and the shares were last seen trading at $71.25.

ONEOK

Despite the volatile price of natural gas over the past year, this stock has been on a roll. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and natural gas liquids (NGLs) gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying master limited partnership, ONEOK Partners.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.

Jefferies is also positive on the company’s primarily fee-based earnings, which account for 90% of the total earnings.

ONEOK investors are paid a very solid 4.45% dividend. The Jefferies price objective is $67. The consensus target price is $68.38, and the shares traded above both levels on Monday at $70.65.

These five top companies with distinctly different businesses offer investors a variety of ways to play the energy sector, from aggressive exploration and production to LNG, large-cap integrated and natural gas. While they vary greatly in risk, they all make sense for long-term investors looking to be in the sector.