Global oil prices are on the rise due to a combination of strategic government procurements, production cuts by major oil-producing nations, and overall market forecasts indicating upward trends.
In response, let's delve into the fundamentals of three robust energy stocks, Delek US Holdings, Inc. (DK), Solaris Oilfield Infrastructure, Inc. (SOI), and Permianville Royalty Trust (PVL), for potential gains in the near future. Before delving into highlighted stocks, let's delve into the unfolding dynamics within the industry.
Crude oil prices surged this week, building on Friday's momentum, following revelations that the U.S. federal government is strategically procuring 3 million barrels for the petroleum reserve.
Having already acquired 9 million barrels in three installments, this marks the initial phase of replenishing the Strategic Petroleum Reserve (SPR) after utilizing over 180 million barrels last year to stabilize fuel prices. The announcement of SPR refilling has contributed to a further anticipated price elevation.
Additionally, the Organization of Petroleum Exporting Countries (OPEC) is strategizing an additional 900,000 barrels per day reduction in oil output for the first quarter of 2024, supplementing previous commitments.
In response to the oil cartel's initiatives, Russia has committed to reducing crude supplies by 300,000 barrels per day and petroleum products by 200,000 barrels per day for the first quarter of 2024. Individual member nations have independently pledged voluntary cuts totaling 2.2 million barrels per day.
This concerted effort to limit availability may exert upward pressure on global oil prices due to evolving demand-supply dynamics. According to the U.S. Energy Information Administration (EIA), the global benchmark, Brent crude oil, is forecasted to ascend from an average of $90 per barrel in 2023 to an anticipated $93 per barrel in 2024.
In light of these trends, let’s look at the fundamentals of the three energy stocks.
Delek US Holdings, Inc. (DK)
DK is involved in the integrated downstream energy sector, operating in Refining, Logistics, and Retail segments. It caters to a diverse clientele, including oil companies, independent refiners, distributors, and government entities, as well as serving utility and transportation companies and independent retail fuel operators.
Over the past three years, DK’s revenue increased at a CAGR of 31.1%. In addition, the company’s total assets grew at a 6.4% CAGR during the same time frame.
For the third quarter that ended September 30, 2023, DK’s operating income increased 324% year-over-year to $224.70 million. Its net income grew 710.1% from the year-ago value to $136.10 million. Also, income per share stood at $1.97, registering a significant rise from the prior year’s period.
Furthermore, the company’s cash inflow from operating activities increased 232.3% from the prior year’s period to $432.60 million. Shares of DK have gained 10.2% over the past six months to close the last trading session at $25.92.
DK’s robust fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
DK has an A grade for Growth and a B for Value and Momentum. It is ranked #15 out of 85 stocks within the Energy - Oil & Gas industry.
In addition to the POWR Ratings I’ve highlighted, you can see DK’s Stability, Quality, and Sentiment ratings here.
Solaris Oilfield Infrastructure, Inc. (SOI)
SOI designs and manufactures mobile proppant management systems, facilitating the unloading, storage, and delivery of proppant, water, and chemicals at oil and natural gas well sites. The company is also engaged in transloading and storing proppant in railcars at its dedicated facility.
Over the past three years, SOI’s revenue and EBITDA increased at a CAGR of 30.7% and 22.4%, respectively. Moreover, the company’s total assets grew at a 4.8% CAGR during the same time period.
SOI’s operating income increased 28.2% year-over-year to $40.66 million for the nine months ended September 30, 2023. Its adjusted EBITDA rose 24.1% from the year-ago value to $75.37 million.
In addition, the company’s adjusted pro forma net income and adjusted pro forma earnings per share grew 23.8% and 25.5% from the prior year’s period to $31.35 million and $0.69, respectively.
The consensus revenue estimate of $327.57 million for the fiscal year ending December 2024 reflects a 9.2% year-over-year improvement. Similarly, the consensus EPS estimate of $1.10 for the next fiscal year exhibits a 14.7% rise from the previous year. Also, the company surpassed the consensus EPS estimates in three of the four trailing quarters.
The stock marginally declined intraday to close the last trading session at $8.10.
SOI’s sound prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
SOI has a B grade for Value and Momentum. It is ranked #10 out of 49 stocks within the Energy - Services industry.
Click here to access the additional SOI ratings (Growth, Stability, Sentiment, and Quality).
Permianville Royalty Trust (PVL)
PVL is a statutory trust established to acquire and manage a net profits interest, entitling Trust unitholders to approximately 80% of the net profits generated from the sale of oil and natural gas produced from specific properties in Texas, Louisiana, and New Mexico held by Enduro Resource Partners LLC.
Over the past three years, PVL’s revenue and EBIT grew at a CAGR of 26.5% and 28.8%, respectively. Also, the company’s net income and EPS grew at 23.1% and 23.1% CAGR during the same time period.
For the quarter that ended September 30, 2023, PVL’s total gross profits stood at $13.99 million, while its net profits came at $3.56 million. Its distributable income stood at $2.48 million. As of September 30, 2023, its cash and cash equivalents stood at $1.33 million compared to $922.91 thousand as of December 31, 2022.
The stock plunged 1.6% intraday, closing the last trading session at $1.90.
PVL’s positive outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
PVL has a B grade for Momentum, Sentiment, and Quality. It has ranked #13 out of 85 stocks within the Energy - Oil & Gas industry.
Click here to access additional PVL ratings for Growth, Value, and Stability.
What To Do Next?
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DK shares were trading at $25.55 per share on Tuesday morning, down $0.37 (-1.43%). Year-to-date, DK has declined -1.74%, versus a 22.36% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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