While the recent hurricanes have passed and recovery is still underway, there is one sign — at least on the East Coast — that is the leading indicator of how well Texas and the South are faring: Oil prices.
But recent prices haven’t simply been driven by natural disasters. In recent days, the independence vote in northern Iraq’s Kurdish region has pushed prices up because of concerns about military repercussions from Turkey and/or Iraq.
U.S. crude sits above $50 a barrel, hitting a high this week around 52. Brent crude hit a 2-year high this week around $59 a barrel.
These prices aren’t likely to stay here, but given the strength of the global economy, it’s likely 50 will be more likely than 30 for the rest of the year and beyond.
That’s why it’s a good time to highlight 10 energy stocks to buy for the rest of 2017. Some of these are limited partnerships with huge dividends, others are just good ways to play the rebound in prices in the energy patch.
Energy Stocks to Buy: Dominion Energy Midstream Partners LP (DM)
One of DM’s top assets is the Cove Point natural gas export terminal in Maryland. Once this is operational, it will be able to sell gas beyond U.S. borders, where prices are much higher than they are in the U.S.
Also, as U.S. companies and utilities have been converting to natural gas in recent years, this is starting to show in growing demand and lower reserves, which means higher prices and greater profits for DM.
Energy Stocks to Buy: Enerplus Corp (USA) (ERF)
Enerplus Corp (USA) (NYSE:ERF) is a natural gas exploration and production (E&P) company with operations in Canada and some of the top shale regions in the U.S.
After the sustained low prices for natural gas and government incentives for big energy consumers to lower emissions, many companies and utilities have been converting from coal to natural gas. And given natural gas’ cleaner burn and higher efficiency — and its competitive prices — demand for gas is rising.
Now that prices are rising, and reserves are falling as demand increases, E&P firms should be one of the first beneficiaries of this trend. And this trend should grow for the next few years as the global economy recovers.
Energy Stocks to Buy: KNOT Offshore Partners LP (KNOP)
KNOT Offshore Partners LP (NYSE:KNOP) is a niche company in the energy patch. It leases shuttle tankers for long-term charter (5 years or more) to the biggest players in the global energy industry.
A shuttle tanker is a ship that operates in place of a pipeline from a drill site. It takes on the oil and then shuttles it to the land terminal for distribution.
Obviously, it’s work that is very dependent on the demand for energy, so it has not been in huge demand recently, which means prices for charters go down, as do profits.
But this isn’t about KNOT stock’s growth as much as its huge dividend — 8.8% — and its sustainability. As the energy patch improves this generous dividend should be solid and KNOT stock should see some growth from here as well.
Energy Stocks to Buy: RPC, Inc. (RES)
RPC, Inc. (NYSE:RES) is an oil services company that works primarily with smaller, independent E&P firms in the U.S.
Unlike the big dog in the industry — Schlumberger Limited. (NYSE:SLB) — RES is more focused, which is usually a double-edged sword. If the U.S. energy patch is doing well, RES is doing very well. But if there’s a glitch in the U.S. or with big players like SLB, RES stock is hit hard.
Up until recently, RES was at the fate of the latter scenario, paying the price for tough numbers from the big global players. But that has changed in recent weeks and over the past month, the stock has taken off nearly 30%. And that upside is just the start.
Energy Stocks to Buy: Statoil ASA(ADR) (STO)
Statoil ASA(ADR) (NYSE:STO) is the publicly traded Norwegian oil company that is still majority owned by the Norwegian government. But its operations now extend far beyond the Norwegian offshore fields and are now present in most of the major energy producing nations of the world.
STO is also putting a lot of money and research into renewable energy resources, especially in Norway, where wind is a significant resource.
Europe is a key customer for STO and it will remain so as tensions with Russia make alternative sources of natural gas very important, especially in the winter. And state control means that STO stock is a steady investment, and its 4.4% dividend is also rock solid.
Furthermore, STO stock’s 20% move in the past 3 months is very encouraging.
Energy Stocks to Buy: Centennial Resource Development Inc (CDEV)
Centennial Resource Development Inc (NASDAQ:CDEV) is an independent E&P that is a focused play in the Delaware Basin, a sub-basin of the highly productive Permian Basin in West Texas.
After oil prices tanked and E&P shuttered operations, only the strongest survived. CDEV has a particular niche in natural gas liquids (NGLs) — these are refined from the natural gas and sold as products to various industries — that also helped keep it going.
But E&P firms are back and demand is coming back as well as prices. CDEV stock is up 18% in the past 3 months, which is a bullish sign of things ahead. It’s also an attractive takeover prospect for bigger integrated players if the sector heats up.
Energy Stocks to Buy: Noble Midstream Partners LP (NBLX)
Basically, midstream energy companies are the toll roads of the energy sector. They have the infrastructure to move, store and distribute oil and natural gas and NGLs from field to refinery to transport hubs.
Midstream firms like NBLX are a great place to be when the sector is growing because as demand increases, so does the pipeline business. And since midstream firms make money off volume rather than energy prices, downstream demand means bigger profits.
Energy Stocks to Buy: Transportadora de Gas del Sur SA (ADR) (TGS)
Transportadora de Gas del Sur SA (ADR) (NYSE:TGS) is a midstream energy company that focuses on natural gas transportation and distribution from western Argentina to Buenos Aires and surrounding areas.
Over the past few years, Argentina’s economy has been struggling, like most of its emerging market brethren. Its large South American neighbor has been especially hard hit in recent years, which certainly hasn’t helped, either.
But both countries are on the mend finally. Because Argentina was in less of a economic hole than its northern neighbor, it has gotten back on its feet much more quickly and that has been very bullish for TGS.
Up 125% year-to-date, Morgan Stanley started coverage of TGS in late September as Overweight. That shows the run is just beginning.
Energy Stocks to Buy: Mesa Royalty Trust (MTR)
Mesa Royalty Trust (NYSE:MTR) is an old variant on what we see more often today as master limited partnerships (MLPs) or limited partnerships (LPs).
The company has productive oil and gas properties in Kansas, New Mexico, Colorado and Wyoming.
In the old days — 1979 in the case of MTR — big oil companies would spin off productive properties into royalty trust so they could raise money without diluting their shares. They would carve off some acreage form a royalty trust and issue stock. The proceeds would then flow to the larger company.
Most of these have disappeared over time or have been converted to LPs or MLPs. But a handful remain. And they usually throw off huge dividends. In this case, MTR is delivering a 9.4% yield. And the stock is up 32% in the past 3 months.
Energy Stocks to Buy: San Juan Basin Royalty Trust (SJT)
San Juan Basin Royalty Trust (NYSE:SJT) is one of the few royalty trusts left in the sector. Its specific play is in the San Juan Basin in New Mexico.
Spun off from major E&P Southland (now Burlington), SJT’s royalty trust status means that it is basically the landlord of productive wells on the property and it pays out big dividends to investors in return.
The most attractive aspect to this arrangement is, SJT, like the remaining energy royalty trusts, is its debt free. It doesn’t have to borrow or leverage to make its money or stay profitable. And the higher energy prices go, the better for SJT.
SJT stock now delivers a whopping 10.4% dividend and the stock is up 18% in the past month.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.