Geopolitical chaos, persistent interest rate hikes, and sky-high inflation had an impact on the overall economy. On the contrary, the energy sector has fared comparatively well and is anticipated to thrive this year as well.
Against this backdrop, let us explore some energy stocks Scorpio Tankers Inc. (STNG), North European Oil Royalty Trust (NRT), and Epsilon Energy Ltd. (EPSN), that could be watched in May.
Energy demand is experiencing a rebound due to China’s reopening. OPEC forecasts the global primary energy demand to increase by 23% in the period to 2045. In addition, OPEC projects Chinese oil demand to grow by 760,000 barrels per day (bpd) this year.
Moreover, the IEA said in its Oil Market Report for April showed that global oil demand rose by 810,000 bpd year-on-year in the first quarter to 100.4 million bpd. The organization noted, “A much stronger increase of 2.7 mb/d is expected through year-end, propelled by a continued recovery in China and international travel.”
Coupled with the increasing demand driving up prices, simultaneous production cuts by OPEC+ are likely to keep the prices up. In addition, Iran’s recent seizure of a second oil tanker in the Gulf waters in a week could disrupt oil supplies and elevate prices.
Furthermore, a Reuters survey of 40 analysts and economists showed that oil prices are set to rise toward $90 per barrel by the end of this year. Brent is expected to average at $90.72 in the final quarter of this year, up from $85.78 and $88.86 in the previous two quarters.
Given the industrial tailwinds, quality energy stocks STNG, NRT, and EPSN could be watched in May 2023.
Scorpio Tankers Inc. (STNG)
Headquartered in Monaco, STNG engages in the seaborne transportation of refined petroleum products in the shipping markets worldwide. As of March 23, 2023, its fleet consisted of 113 owned, finance-leased, or bareboat chartered-in tankers.
On May 2, STNG announced that its board of directors had declared a quarterly dividend of $0.25 per common share. Its annualized dividend rate of $1 per share yields 2.10% on prevailing prices. STNG’s four-year average dividend yield is 1.98%. The company’s dividend payouts have grown at CAGRs of 7.7% and 4.6% over the past three and five years, respectively.
STNG’s trailing-12-month levered FCF margin of 57.5% is 755.8% higher than the 6.72% industry average. Its trailing-12-month ROTC of 14.30% is 31.1% higher than the 10.91% industry average.
For the fiscal first quarter that ended March 31, 2023, STNG’s revenue increased 120.9% year-over-year to $384.43 million. For the same quarter, its operating income stood at $231.24 million, compared to an operating loss of $46.83 million in the year-ago quarter.
Its net income and earnings per share stood at $193.24 million and $3.27, compared to net loss and loss per share of $84.45 million and $1.52, respectively, in the prior-year quarter.
Analysts expect STNG’s revenue and EPS for the fiscal year ending December 2023 to come in at $1.39 billion and $11.10, respectively. The company surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 75.4% to close the last trading session at $46.61.
It’s no surprise that STNG has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, STNG has an A grade for Quality and a B for Momentum. It is ranked #13 within the 92-stock Energy – Oil & Gas industry.
Beyond what we have stated above, one can see the additional STNG ratings (Growth, Value, Sentiment, and Stability) here.
North European Oil Royalty Trust (NRT)
NRT is a grantor trust that holds overriding royalty rights covering gas and oil production in various concessions or leases in the Federal Republic of Germany. The company has rights under contracts with German exploration and development subsidiaries of ExxonMobil Corp. and the Royal Dutch/Shell Group of Companies.
On April 28, NRT announced a quarterly dividend distribution of $1.05 per unit for the second quarter of the fiscal year 2023. Its annualized dividend rate of $4.20 per share yields 28.4% on prevailing prices. NRT’s four-year average dividend yield is 10.69%. The company’s dividend payouts have grown at CAGRs of 56% and 27% over the past three and five years, respectively.
NRT’s trailing-12-month levered FCF margin of 88.10% is significantly higher than the 6.72% industry average. Its trailing-12-month ROTA of 244.48% is significantly higher than the industry average of 8.30%, respectively.
During the fiscal first quarter that ended January 31, 2023, NRT’s net income and income per unit increased 305.5% and 300% year-over-year to $9.54 million and $1.04, respectively. NRT’s current assets (cash and cash equivalents) stood at $9.93 million as of January 31, 2023, compared to $7.19 million as of October 31, 2022.
Over the past month, the stock has gained 5.1% to close the last trading session at $13.99. Over the past five days, it has gained marginally.
NRT’s POWR Ratings reflect its positive outlook. It has an overall B rating, which equates to Buy in our proprietary rating system.
In addition, NRT has an A grade for Growth, Momentum, and Quality. It is ranked #14 within the same industry.
Click here to get additional NRT ratings (Value, Sentiment, and Stability).
Epsilon Energy Ltd. (EPSN)
EPSN acquires, develops, gathers, and produces oil and gas reserves in the United States. It operates through Upstream and Gathering System segments.
On March 8, EPSN announced that its board of directors had declared a dividend of $0.0625 per share of common stock (annualized $0.25 per share), paid to stockholders on March 31, 2023. Its annualized dividend rate yields 5% on prevailing prices. EPSN’s four-year average dividend yield is 0.78%.
EPSN’s trailing-12-month levered FCF margin of 31.88% is 374.5% higher than the 6.72% industry average. Its trailing-12-month ROTC of 32% is 193.3% higher than the 10.91% industry average.
EPSN’s total revenue came in at $15.20 million for the fiscal fourth quarter that ended December 31, 2022, up 10.1% year-over-year. Its adjusted EBITDA stood at $11.60 million, up 28.9% year-over-year for the same quarter.
EPSN’s net cash provided by operating activities and total current assets stood at $38 million and $55.46 million for the year that ended December 31, 2022, compared to $20 million and $31.66 million for the year that ended December 31, 2021, respectively.
Over the past month, the stock has lost 5.7% to close the last trading session at $5.
EPSN’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our proprietary rating system.
In addition, it has an A grade for Quality and a B for Sentiment. EPSN is ranked #16 within the same industry.
To get additional EPSN ratings for Growth, Value, Momentum, and Stability, click here.
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STNG shares were trading at $47.78 per share on Friday morning, up $1.17 (+2.51%). Year-to-date, STNG has declined -10.84%, versus a 7.98% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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