In recent months, oil prices have remained consistently above $80 a barrel. This trend, which began in June, can be attributed to Saudi Arabia’s strategic production cuts aimed at boosting demand. In this context, Enerplus Corporation ERF, Evolution Petroleum EPM and Sunoco LP SUN present investment opportunities for those looking to capitalize on the Oil/Energy sector strength.
While the summer rally slowed down in August due to concerns about the global economic outlook, market observers believe that this is merely a pause. Saudi Arabia is expected to extend its million-barrel-per-day production cuts through October, maintaining upward pressure on prices.
In addition to Riyadh’s efforts, recent data from the Energy Information Administration revealed a significant decrease in U.S. commercial crude inventories. Over the past five weeks, these inventories have fallen by almost 34 million barrels. To put that in context, total domestic stock now stands at 422.9 million barrels — just 1.1% more than the year-ago figure but 3% lower than the five-year average. This was despite the release of 100 million barrels from the U.S. Strategic Petroleum Reserve.
In response, oil prices have surged in five of the last six trading sessions, marking almost a 4% gain. With crude prices on the rise and favorable market conditions, the potential for substantial returns is looking increasingly promising.
We have narrowed our search to three energy firms that have strong potential for the rest of 2023. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Enerplus: An upstream operator, Enerplus focuses on Bakken and Three Forks formations in the Williston Basin in North Dakota, together with interests in the Marcellus Basin and waterflood projects in Canada. Banking on its low financial leverage and robust liquidity, the #1 Ranked ERF is in a pole position to take advantage of the sharply higher commodity prices.
The Calgary-based company is valued at some $3.6 billion. Over the past 30 days, Enerplus saw the Zacks Consensus Estimate for 2023 move up 8.6%. ERF shares have gained 10% in a year.
Evolution Petroleum: Founded in 2003, Evolution Petroleum is an independent upstream operator engaged in the exploration, development and production of onshore oil and natural gas properties in the United States. Headquartered in Houston, TX, EPM is focused on the non-operated working interests in high-quality, long-life reserves in several properties across the nation. Evolution Petroleum is known for its prioritization of maximizing shareholder returns through buybacks and dividends.
The fiscal 2023 Zacks Consensus Estimate for the Houston, TX-based firm indicates 15.6% year-over-year earnings per share growth. EPM, with a Zacks Rank of 2, beat the Zacks Consensus Estimate for earnings in three of the last four quarters and missed in the other. It has a trailing four-quarter earnings surprise of roughly 38.4%, on average. EPM shares have gained 19.8% in a year.
Sunoco LP: Sunoco participates in the transportation and supply phase of the U.S. petroleum market across a number of states. It also focuses on motor fuel distribution to convenience stores, independent dealers and commercial customers.
It is valued at some $4.6 billion. The Zacks Consensus Estimate for SUN’s 2023 earnings has been revised 6.8% upward over the past 30 days. The third quarter Zacks Consensus Estimate for the Zacks #2 Ranked Sunoco indicates 38.7% year-over-year earnings per share growth. SUN shares have gained 16.1% in a year.
Sunoco LP (SUN): Free Stock Analysis Report
This article originally appeared on Zacks
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