7 Oil Stocks to Buy Heading Into April


Oil Stocks - 7 Oil Stocks to Buy Heading Into April

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One month into the Russian invasion of Ukraine and turbulence in the oil markets are far from over. West Texas Intermediate (WTI) crude touched a multi-year high on March 7 of $130.5 per barrel, offering a vigorous upside for crude oil stocks. Since then, the complex declined below the psychological level of $100 per barrel. However, the bullish momentum has been restored in the past week, as the commodity jumped to $112.58 per barrel, posting a robust year-to-date performance of 48.7%.

In the meantime, the broad equity market underperformed the “black gold” commodity and the SPDR S&P Trust ETF (NYSEARCA:SPY) dropped 5.24% since the beginning of the year to $452.69 per share at the time of writing, March 25.

Going forward, crude oil stock gains should continue to outperform the market, as geopolitical tensions are unlikely to ease at least in the short term. The recent announcement by Russian officials to ban oil and gas delivery payments in euros and dollars, combined with rising anticipations on a fresh wave of sanctions on the Russian economy will contribute to providing a constructive backdrop for the commodity and thus for oil stocks.

The international boycott of Russia’s oil continues to advance and there’s a real lack of alternative sources of supply. So, here are the stocks investors should buy heading into April to benefit from rising oil prices:

  • Murphy Oil (NYSE:MUR)
  • Coterra Energy (NYSE:CTRA)
  • TotalEnergies (NYSE:TTE)
  • Shell (NYSE:SHEL)
  • Vermilion Energy (NYSE:VET)
  • Canadian Natural Resources (NYSE:CNQ)

Oil Stocks to Buy for April: Murphy Oil (MUR)

Murphy Oil (MUR) logo on the website homepage.
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MUR stock is an American mid-cap oil and gas company with international exposure that has performed relatively well in the current market environment. MUR shares surged 55.95% since the beginning of the year to $43.15 per share on March 25. It is lagging only slightly behind the performance of the broader oil markets.

The company missed earnings per share (EPS) anticipations in the fourth quarter of 2021, reporting EPS of 40 cents against expectations of 45 cents. Top-line grew rapidly in 2021, up 16.9% to $2.29 billion, and is expected to speed up by 32.4% to $3.04 billion this year.

In terms of profitability, MUR stock reported a net loss of $737 million last year but is expected to deliver a profit of $523 million in 2022, representing a net margin of 17.2%. This comes at the back of rising production guidance, up 6% year-on-year. This is attributable to major oilfield deliveries in the Gulf of Mexico expected in the second quarter of 2022, which should propel the stock to new highs.

Murphy Oil has also a well-capitalized balance sheet, with an esteemed net debt of $1.03 billion in 2022, corresponding to a low leverage ratio of 0.57x.

The company boosted its quarterly dividend by 20% to 15 cents per share providing an annual yield of approximatively 1.31%. Despite these positive developments, MUR stock continues to trade at an attractive 2022e Enterprise Value (EV) on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) of just 3.94x and a relatively low forward Price to Earnings (P/E) of 12.1x.

Coterra Energy (CTRA)

photo of large oil well infrastructure in a field at sunset
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Another U.S oil and gas company that underperformed oil stocks is Coterra Energy. Since the beginning of the year, CTRA stock gained 47.73% to $28.91 per share on March 25.

The company has missed revenue guidance in the last three quarters and posted earnings per share results short of expectation in the last two quarters. However, Coterra offers one of the strongest net margins of the oil universe, with an esteemed profit margin of 27.9% in 2022 and 23.4% in 2023.

On the other side, revenues soared in 2021 to $7.92 billion year-on-year and are expected to progress at a slower pace this year, up only 8.6% to $8.6 billion. Nevertheless, CTRA’s bottom line is projected to soar 146.7% to $2.4 billion in 2021 versus a profit of $973 million last year.

Besides, analysts expect capital expenditure (capex) to lift 44.5% this year to $1.6 billion, despite the rapid debt reduction operated in the last year. Net debt shrank 15.3% in 2021 to $7.2 billion and is expected to reach $5.4 billion this year, a 24% year-on-year decline

With that being said, CTRA remains cheap compared to other major oil stocks, trading at 4.98x 2022e EV/EBITDA and 11.7x forward P/E.

Oil Stocks to Buy for April: TotalEnergies (TTE)

 Logo on the sign of a TotalEnergies (TTE) gas station, new name of the French oil company Total
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TTE is a French oil and gas major and one of the leading integrated oil groups in the world. TTE stock gained only 2.94% year-to-date to $52.48 per share by March 25. The company has suffered from its exposure to Russian oil, which represented 17% of its total throughput in 2021.

Nevertheless, TotalEnergies recently confirmed that purchases of Russian oil and oil products will cease by the end of the year when the current contracts of approximately 10 million tons per year (T/Y) of oil and approximately two million T/Y of oil products expire.

Despite that, TotalEnergies’ revenues are expected to advance healthily this year, up 27% year-on-year to $234.5 billion. This will follow a robust lift of 54.2% to $184.6 billion in 2021. Besides, after turning positive in 2021 to $16.03 billion, the bottom line is projected to rise another 40.6% in 2022 to $22.5 billion, delivering an esteemed profit margin of 9.61%.

TTE stock lifted its free cash flow (FCF) generation in the past two years and should continue on this path this year, as FCF is expected to climb 12.9% to $20.3 billion. In the meantime, analysts are forecasting a significant debt reduction this year, down 48.3% year-on-year to $22.3 billion, representing a leverage ratio of only 0.43x.

After underperforming oil markets in 2021, TTE stock trades at attractive multiples. It has a forward EV/EBITDA of just 2.94x and 2022e P/E ratio of 6.13x, and a high expected dividend yield of 6.13x for 2022.


BP (BP) sign with leafless trees in the background, wintertime. Represents BP stock.
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BP is a British integrated oil giant and one of the world’s leading oil stocks. Since the beginning of the year, BP stock gained 13.45% to $31.05 per share by March 25. It is also underperforming other major oil stocks. BP has a stake of 19.75% in Rosneft, accounting for a third of BP’s oil and gas throughput last year.

While net sales decreased moderately last year, down 12.5% to $157.7 billion, top-line growth is projected to bounce back this year, up 14.8% to $181 billion. On the other side, BP’s net income is forecasted to advance robustly in 2022, up 72.7% year-on-year to $13.06 billion, representing a profit margin of 7.22%.

BP is expected to lift capital expenditures moderately this year, up 9.4% to $13.6 billion. Net debt relative to earnings is low, with an expected net debt of $29.8 billion, representing a leverage ratio of only 0.69x.

In terms of valuation metrics, BP is currently exchanging at a small 2022e EV/EBITDA of 2.99x and 7.86x forward P/E, offering an esteemed yield of 4.52% in 2022.

Oil Stocks to Buy for April: Shell (SHEL)

The Royal Dutch Shell (RDS.A, RDS.B) logo on a gas station in Iceland.
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SHEL is another European exploration and production oil and gas company with global exposure. SHEL stock rose 24.53% year-to-date to $55.34 per share on March 25. Shell is lagging considerably behind other major U.S. oil stocks, due to its link to Gazprom ventures that include the Sakhalin 2 liquefied natural gas and Nord Stream 2 projects. 

Despite that, Shell’s topline grew strongly in 2021, up 44.8% year-on-year to $261.5 billion, but is expected to continue on this robust path, up 31.8% to $334.6 billion. In terms of bottom-line, SHEL turned a profit last year of $20.1 billion. The company is projected to increase it by 38.3% in 2022 to $27.8 billion, offering a profit margin of 8.07%.

Besides, analysts expect a rapid advance of Shell’s capital expenditures this year, up 21% to $22.9 billion. This’ll contribute to the long-term growth of the group. Net debt declined 30.3% in 2021 to $52.5 billion and is esteemed to decrease by another 20.1% this year, offering a low leverage ratio of 0.59x.

SHEL stock is an opportunity at current prices. It posts a forward EV/EBITDA of 3.58x and 2022e P/E ratio of 6.89x and delivering a dividend yield of 3.8% per year in 2022.

Vermilion Energy (VET)

close up of oil pipelines at sunset
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VET is a Canadian mid-cap energy producer and is engaged crude oil and natural gas exploration around the world. VET stock soared since the beginning of the year, up 80.59% to $23.44 per share on March 25. Nevertheless, there is still upside for this oil stock, even if it has outperformed its oil peers.

While the fundamental picture of Vermilion is expected to soften this year, the company offers high-profit margins. After surging 85.7% to $1.51 billion in 2021, revenues are expected to climb 27% this year to $1.91 billion. On the other hand, the profitability of the company is esteemed to decelerate from a massive profit margin of 55.2% last year to 29.2% in 2022. VET also posted a net income of $559 million in 2022, down 32.8% year-on-year.

The balance sheet of the group remains healthy, with a projected net debt of $595 million in 2022, representing a leverage ratio of just 0.37x.

Despite the fast appreciation of VET stock over the year, still offers an attractive valuation, with a 2022e EV/EBITDA of 2.38x and a forward P/E of 6.68x.

Oil Stocks to Buy for April: Canadian Natural Resources (CNQ)

Canadian oil stocks: Silhouette of drilling rigs and oil derricks on the background of the flag of Canada.
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Another independent Canadian oil and gas player that’s worth owning in April is Canadian Natural Resources. CNQ stock expanded 48.08% to $63.72 per share, since the beginning of the year. CNQ fell slightly below the yearly performance of crude oil markets.

The company’s revenues jumped 77.9% to $30 billion in 2021 and are esteemed to develop 19.3% this year to $35.8 billion. On the other side, CNQ’s bottom line is expected to improve in 2022, up 54.4% year-on-year to $11.8 billion. More interestingly, the consensus projects an acceleration of profit margin, from 25.5% in 2021 to 33% in 2022.

Besides, Canadian Natural reduced net debt by 29.6% to $14.7 billion last year and is forecasted to decrease it by another 30% in 2022 to $10.3 billion, generating a leverage ratio of just 0.49x.

The valuation multiples of the Canadian oil & gas specialist remain subdued compared to its high-profit margin. It is trading at a forward EV/EBITDA of only 4.8x and 7.9x P/E ratio. Besides, the company offers an expected dividend yield of 3.5% per year for 2022.

On the date of publication, Cristian Docan did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Article printed from InvestorPlace Media, https://investorplace.com/2022/03/7-oil-stocks-to-buy-heading-into-april/.

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