The financial sector is still reeling from its hard hit last week.
Silicon Valley Bank’s and Credit Suisse’s (CS) collapses, as well as Europe-based Deutsche Bank’s (NYSE:DS) plunge on Friday left folks worried, investors whipsawed, and the broader markets mixed. As a result, at the time of this writing, the financial sector fell about 0.1%, with the banking sector dipping about 0.3%.
But financial stocks weren’t the only ones feeling the hurt from the banking turmoil…
Energy stocks were also impacted by fears of a U.S. banking contagion.
Energy stocks experienced a pullback amidst the crisis; and, as a whole, the sector fluctuated quite a bit this week.
However, I do still like the energy sector. So, in today’s Market 360, I’ll explain why I remain bullish on the energy sector. I’ll also share one of my favorite energy stocks and the big news this company announced last week.
The reality is that natural gas prices are very weather dependent. When you invest in natural gas, you want freezing cold winters and hot, miserable summers. This winter started off warmer than normal, which is why prices fell. But now it’s a bit colder than normal, as it snowed in Seattle and Los Angeles, there’s a record snowpack in the Sierra, and a cold blast is hitting the south.
Also, we’re exporting more and more liquid natural gas (LNG) overseas. Europe simply doesn’t have storage facilities; their storage is actually the LNG tankers in the Baltic Sea. And since the U.S. is the “Saudi Arabia” of natural gas, Europe has turned to us to help meet their natural gas demand. So, natural gas prices should continue to firm up.
Now, crude oil prices have been weak because there’s approximately 8% more oil out there than there was five years ago. However, global supplies are dwindling, as Russian production continues to decline. Russia’s production is already down one million barrels per day, and they cut another half a million barrels per day this month. Add in the fact that crude oil prices always rise in the spring, and it’s easy to see why I think energy prices will go up in the coming months.
An Energy Favorite
ConocoPhillips (NYSE:COP) is one of the largest independent exploration and production companies in the world. When it comes to crude oil and natural gas, the company does a little bit of everything – from extraction to production to transportation. It has an extensive energy portfolio, spanning 13 countries – and it transports oil and natural gas around the world through pipelines, as well as tankers, trucks and rail.
Looking at its earnings, while fourth-quarter and full-year 2022 earnings did fall shy of analysts’ estimates, the company still posted stunning results and provided positive guidance. For the fourth quarter, ConocoPhillips reported adjusted earnings of $3.4 billion, or $2.71 per share, up from $3.0 billion, or $2.27 per share, in the same quarter a year ago. Analysts expected adjusted earnings of $2.81 per share.
Full-year adjusted earnings soared 116.3% year-over-year to $17.3 billion, or $13.52 per share, compared to $8.0 billion, or $6.01 per share, in 2021. The consensus estimate called for full-year adjusted earnings of $14.00 per share. ConocoPhillips also noted that full-year production came in at 1,738 million barrels of oil equivalent per day (Mboed). At the end of the year, the company had proved reserves of about 6.6 billion barrels of oil.
Looking ahead, ConocoPhillips expects full-year production between 1.76 million and 1.80 million boepd. First-quarter production is anticipated to be between 1.72 million and 1.76 million boepd.
In my Portfolio Grader, ConocoPhillips currently has a B-rating, making it a “Buy.”
The Willow Project
Now, as for ConocoPhillips’ big news… The Biden administration approved ConocoPhillips’ Willow project, giving the company the go-ahead to drill at three locations in the National Petroleum Reserve in Alaska. The Willow project, an $8 billion development, is anticipated to produce 180,000 barrels of crude oil per day, or approximately 1.6% of total U.S. production. Over the next 30 years, this project is expected to produce a total of about 576 million barrels of petroleum.
Alaska is now producing less than 25% of the 2 million barrels per day in production back in the 1980s. Other than revitalizing Alaska’s oil industry, ConocoPhillips’ Willow project is also important to preserve the lifespan of the Alaska pipeline, since if crude oil stops flowing, the pipeline will be ruined in cold temperatures. This is also the problem facing Russia, since if they stop production in their Artic oil fields, then their pipelines will likely be damaged and become unusable.
Construction on the project can only happen in the winter season, as ice roads are necessary for building the rest of the infrastructure, and Alaska’s winter season could end sometime next month. So, operations for the Willow project are expected to get underway on Sunday. And the oil pumped from the project could reach the markets within the next several years.
So, ConocoPhillips could achieve big things in the years to come.
P.S. It’s never been tougher to be an investor than it is right now. And the reason isn’t inflation, Russia or the federal government screwing up the economy.
But right now, we find ourselves in the midst of an emerging opportunity in the small-cap market. It’s a near-perfect setup where the return potential hidden within certain small-cap stocks becomes intensified leading to potentially even bigger gains. And this happens around times of peak misinformation and market uncertainty like we are experiencing today.
For full details on this opportunity, check out my Two Huge Predictions 2023 presentation, which I released earlier this week. I also give away the name of a company – ticker symbol and all – that’s poised to skyrocket over the next 12 months.
Click here to watch my Two Huge Predictions 2023 presentation now.
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