The energy market remains volatile, especially the trade in crude oil. After running up to $120 a barrel in 2022 after Russia invaded Ukraine, the price of Brent crude oil, the international standard, and West Texas Intermediate (WTI) crude, the U.S. benchmark, fell about 10% in 2023 during a difficult year. So far in 2024, prices continue to fluctuate amid geopolitical conflicts and demand concerns, notably in China.
Currently, WTI crude oil is trading just above $76 per barrel. The price volatility has played havoc with the earnings of big and small energy companies, leading to the stocks of oil producers turning in the worst performance of any sector in 2023. Most energy stocks missed last year’s market rally entirely and continue to sit on the sidelines this year. While the overall situation is bad, it is worse for some companies than others. Here are three doomed energy stocks to dump before they dive: February 2024.
Chevron (CVX)
Chevron (NYSE:CVX) was one of the first oil majors out with its fourth quarter 2023 financial results and spent much of its earnings touting its dividend and stock buybacks. The company is raising its quarterly dividend by 8% starting in March. Chevron added that it returned a record $23.60 billion to shareholders in 2023 by paying $11.30 billion in dividends and buying back $14.90 billion of its own stock. While strong, the shareholder returns don’t make up for Chevron’s profit, which declined by 40% last year.
The company’s profits from its refining operations dropped 35% year-over-year in Q4 2023 to $1.15 billion. Revenue in the quarter totaled $47.18 billion compared to $51.62 billion expected on Wall Street. The company stressed that it continues to struggle with volatile crude oil prices. Chevron also incurred an impairment charge of $1.90 billion associated with decommissioning assets in the Gulf of Mexico. CVX stock is down 10% over the last 12 months.
Shell (SHEL)
British oil giant Shell (NYSE:SHEL) also reported a sizable decline in its profits for last year. The energy company posted earnings of $28.25 billion for 2023, a 29% decline from its record annual profit of $39.9 billion in 2022 when crude prices were above $100 per barrel. For Q4 2023, Shell posted stronger-than-anticipated earnings of $7.31 billion. However, that was almost entirely due to liquefied natural gas (LNG) trading. The company’s oil production continues to weaken.
But like Chevron, Shell has tried to distract investors with dividend payments and stock buybacks. The company announced increasing its quarterly dividend payment to shareholders by 4%, lifting the payout to $0.65 per share. Additionally, the company announced a new $3.5 billion share buyback program to be carried out over the next three months. SHEL stock continues to waver, having declined 4% in 2024. Over the last five years, the company’s share price has risen a paltry 1%, making it a doomed energy stock to dump.
British Petroleum (BP)
British Petroleum (NYSE:BP) is now dealing with several problems that make it look like a doomed energy stock. The European oil giant just announced that its net profit for last year was half the year before at $13.80 billion. Also, BP’s debt remains stubbornly high at nearly $21 billion. And the company has a new, unproven CEO in Murray Auchincloss. Former CEO Bernard Looney resigned last year following a workplace scandal.
BP is also catching flak for its energy transition strategy, which environmentalists claim is a lot of smoke and mirrors. However, BP also wants to convince investors to look past these issues as it announces a new stock buyback program. The company announced that it will buy back $3.50 billion of its own stock in this year’s first half and repurchase a total of $14 billion through 2025. Despite its best efforts, BP stock is down 8% over the last 12 months and down 14% through five years.
On the date of publication, Joel Baglole 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.
