4 Must-Own International Energy Stocks to Buy Right Now
Energy was the second-best performing industry in the S&P 500 last month, thanks to surging crude oil prices. And since the industry’s prospects look bright with rising demand from recovering...
Energy was the second-best performing industry in the S&P 500 last month, thanks to surging crude oil prices. And since the industry’s prospects look bright with rising demand from recovering economies, we think it could be wise to bet now on fundamentally sound international energy stocks PJSC Lukoil (LUKOY), Vermilion Energy (VET), GeoPark (GPRK), and Transportadora de Gas del Sur S.A. (TGS). Read on.
Last year, energy-intensive industries were forced to come to a near halt to contain the spread of COVID-19 and comply with the social distancing guidelines. But with solid progress on the vaccination front and the easing of social distancing norms, most of these industries are reopening this year, significantly increasing the demand for energy.
While the demand is rising, major oil-producing countries’ curbed supply has driven crude oil prices to new highs. And since the demand for energy is expected to continue inching up, energy companies should thrive. Strong investor interest in the industry is evident in the 89.1% and 103.5% respective returns of iShares Global Energy ETF (IXC) and Energy Select Sector SPDR ETF (XLE) over the past year.
So, we think International energy stocks PJSC Lukoil (LUKOY), Vermilion Energy Inc. (VET), GeoPark Limited (GPRK), and Transportadora de Gas del Sur S.A. (TGS) could be solid bets to cash in on the industry tailwinds.
PJSC Lukoil (LUKOY)
Headquartered in Moscow, Russia, LUKOY and its subsidiaries explore for, produce, refine, market, and distribute oil and gas. It has four refineries in Russia, along with three refineries in Europe. It also has a 45% stake in a refinery in the Netherlands. The aggregate capacity of its refineries is 80.4 million tonnes.
On October 7, 2021, LUKOY announced an agreement to acquire an additional 15.5% interest in Petronas's Shah Deniz natural gas project. With this acquisition, LUKOY’s interest in the project will increase to 25.5%. The President of LUKOY, Vagit Alekperov, said, “Increasing our share in the Shah Deniz project creates new opportunities for synergy in future-oriented economy sectors of our countries.”
LUKOY’s sales increased 123.2% year-over-year to RUB2,201.90 billion ($30.70 billion) for its fiscal second quarter, ended June 30, 2021. Its EBITDA increased 135.3% year-over-year to RUB339.80 billion ($4.75 billion). And its net profit for the second quarter was RUB189.80 billion ($2.60 billion) versus a RUB18.7 billion ($261 million) loss in the prior-year quarter.
Analysts expect LUKOY’s revenues for its fiscal 2021 to be $115 billion, representing a 50.9% increase year-over-year. The stock has gained 96.9% in price over the past year to close yesterday’s trading session at $100.77.
LUKOY’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
LUKOY has an A grade for Momentum, and a B grade for Growth, Sentiment, and Quality. In the A-rated Foreign Oil & Gas industry, it is ranked #1 of 49 stocks. To check the additional POWR Ratings of LUKOY for Value and Stability, click here.
Vermilion Energy Inc. (VET)
Based in Calgary, Canada, VET engages in acquiring, exploring, developing, and producing petroleum and natural gas. Its operations focus mainly on exploiting light oil and liquids-rich natural gas conventional resource plays in North America and exploring and developing conventional natural gas and oil opportunities in Europe and Australia.
On October 13, 2021, VET announced that it had received certification under the EO100 Standard for Responsible Energy Development from Equitable Origin for three of its natural gas production sites in west-central Alberta. President Curtis Hicks said, “Independent and stringent certifications such as Equitable Origin provide an important signal about operational quality to stakeholders such as our investors, governments and communities.”
VET’s fund flow from operations increased 111.3% year-over-year to CAD173 million ($139.5 million) for its fiscal second quarter, ended June 30, 2021. Its free cash flow increased 137% year-over-year to CAD94 million ($75.6 million). Also, its net earnings came in at CAD451 million ($364 million) compared to a CAD71.3 million ($57.5 million) loss in the prior-year quarter.
Analysts expect VET’s revenues for its fiscal year 2021 to increase 50.7% to $1.33 billion. Over the past year, the stock has gained 323.2% in price to close yesterday’s trading session at $10.92.
VET’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our proprietary rating system. It has an A grade for Momentum, and a B grade for Value, Sentiment, and Quality.
GeoPark Ltd. (GPRK)
GPRK, which is based in Santiago, Chile, is one of the leading Latin American oil and gas explorers, operators, and consolidators of assets and growth platforms in Colombia, Ecuador, Chile, Brazil, and Argentina. It happens to be the third-largest oil operator in Colombia and the first private oil and gas producer in Chile.
GPRK’s revenues increased 197.6% year-over-year to $165.6 million for its fiscal second quarter, ended June 30, 2021, while its operating profit came in at $19.20 million, versus a $20.80 million loss in the prior-year quarter. The company’s adjusted EBITDA increased 117.9% year-over-year to $60.50 million. Also, the operating netback increased 82.5% year-over-year to $74.20 million.
Analysts expect GPRK’s EPS for its fiscal year 2022 to be $2.77, representing a 136.5% increase year-over-year. Its revenues for its fiscal year 2021 are expected to increase 64% year-over-year to $645.50 million. The stock has gained 117.8% in price over the past year to close yesterday’s trading session at $15.03.
It’s no surprise that GPRK has an overall rating of A, which translates to a Strong Buy in our POWR Rating system. It has an A grade for Growth and Momentum, and a B grade for Quality.
Transportadora de Gas del Sur S.A. (TGS)
TGS provides natural gas transportation and distribution services in Argentina. It operates through four segments: natural gas transportation services; liquids production and commercialization; telecommunication; and other services. It transports natural gas through 5,769 miles of pipelines to various distribution companies, power plants, and industrial customers. The company is headquartered in Buenos Aires, Argentina.
TGS’s revenues for its fiscal second quarter, ended June 30, 2021, increased 11% year-over-year to AR$17.90 billion ($179 million), while its net income increased 56% year-over-year to AR$3.39 billion ($34 million). Its EPS increased 31.2% year-over-year to AR$4.5 ($0.04).
Analysts estimate that its EPS for its fiscal year 2021 will increase 13.3% year-over-year to $0.34. TGS’s revenues for its fiscal 2022 are expected to increase 4.5% year-over-year to $693 million. Also, it has surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past three months, the stock has gained 20% in price to close yesterday’s trading session at $5.31.
TGS’s POWR Ratings reflect this promising outlook. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. It has a B grade for Value, Momentum, Stability, and Quality.
LUKOY shares fell $1.47 (-1.46%) in premarket trading Wednesday. Year-to-date, LUKOY has gained 51.36%, versus a 24.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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