The World Bank has warned that escalating tensions in the Middle East could push oil prices above $100 per barrel, reversing the recent downward trend in global inflation. Even before the recent conflicts, commodity prices were stabilizing, complicating interest rate decisions for central banks. This environment suggests that top strong buy oil and gas stocks stand to benefit significantly.
If the crisis worsens, the Bank’s forecast of crude prices averaging $84 a barrel this year may be too optimistic. The conflict could also increase natural gas, fertilizers and food prices, as a fifth of liquefied natural gas exports pass through the Strait of Hormuz.
With this bullish outlook, investors should consider three oil and gas stocks with strong buy ratings for June 2024. These companies may benefit from higher oil prices and have the potential for enhanced shareholder yield through dividends and stock buybacks.
Here’s what should be on your watchlist.
Schlumberger Limited (SLB)
Schlumberger (NYSE:SLB) is one of the largest oilfield services companies in the world. It provides technology, integrated project management and information solutions to the oil and gas industry.
SLB’s 2023 performance was robust, with significant growth in key metrics. The company reported revenue of $8.71 billion for Q1 2024, a 12.6% year-over-year increase. The Q1 EPS was $0.75, meeting analysts’ expectations. SLB saw strong international activity, especially in the Middle East and Asia, which drove revenue growth in its Reservoir Performance and Well Construction divisions.
2024 SLB plans to return $7 billion to shareholders for 2024-2025. Analysts predict earnings growth of 21.37% for the coming year, with EPS expected to rise from $3.51 to $4.26 per share. Revenue for 2024 is forecasted to increase by 13.43% to $37.59 billion from $33.14 billion in 2023.
Analysts maintain a “strong buy” rating for SLB, with a 12-month price target range between $53 and $81, suggesting an average upside of 54.73%
Shell (SHEL)
Analysts strongly recommend global oil and gas giant Shell (NYSE:SHEL).
Shell reported strong financial performance in 2023. For the first quarter of 2024, the company posted revenue of $8.71 billion, which aligned with analysts’ expectations. Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for Q1 2024 were robust across its business segments. Production ranged between 960 and 1,000 barrels of oil equivalent per day (kboe/d), with LNG liquefaction volumes between 7.2 and 7 million tonnes (MT).
Foell plans to maintain cash capital spending in the range of $22-25 billion per year in 2024 and reduce structural costs by $2-3 billion by the end of 2025 compared with 2022.
Shell targets shareholder distributions of 30-40% of cash flow from operations through the cycle. These distributions may be returned to shareholders through dividends and share buybacks.
Cheniere Energy (LNG)
Cheniere Energy (NYSE:LNG) is a leading player in the liquefied natural gas (LNG) market, focusing on the development and operation of LNG facilities. The company owns and operates the Sabine Pass LNG terminal in Louisiana and the Corpus Christi LNG terminal in Texas. It is a major producer and exporter of LNG.
In the first quarter of 2024, Cheniere reported revenues of $4.3 billion, down from $7.3 billion in Q1 2023. Despite this decrease, the company met analysts’ expectations, with net income reaching $0.5 billion. The company’s Consolidated Adjusted EBITDA for Q1 2024 was $1.8 billion, and it generated a distributable cash flow of $1.2 billion
For the rest of 2024, Cheniere has set solid financial targets. The company plans to maintain cash capital expenditures between $1.5 billion and $1.8 billion. Cheniere also aims to achieve a Consolidated Adjusted EBITDA of approximately $7.8 billion to $8.3 billion. Additionally, the company has reaffirmed its distributable cash flow guidance at approximately $5.8 billion to $6.3 billion for the full year.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
