3 Energy Stocks Signaling ‘Buy’ to Take Advantage of This Week

Higher oil prices and robust energy demand are primary drivers for sustained growth in domestic oil production this year, propelling the demand for energy services. Hence, it could be wise to buy fundamentally solid energy stocks NOW (DNOW), MRC Global (MRC), and Solaris Oilfield (SOI) this week for potential gains. Continue reading….

The U.S. oil production is expected to witness continued growth this year and beyond, driven by rising oil prices and high energy demand worldwide, creating several growth opportunities for companies offering energy services.

Given the industry’s rosy prospects, quality energy stocks NOW Inc. (DNOW), MRC Global Inc. (MRC), and Solaris Oilfield Infrastructure, Inc. (SOI) could be solid buys this week.

Last month, the world’s major crude exporter Saudi Arabia announced extension of its voluntary oil production cut of 1 million barrels per day (b/d) through the end of 2023. Fellow heavyweight oil producer Russia also extended its 300,000 b/d reduction of exports until the year-end.

Before pulling back from those levels, Oil prices surged to their highest mark in more than a year two weeks earlier due to scarce supply and inventory supplies. The U.S. West Texas Intermediate futures touched $95.03 a barrel, marking the highest since August 2022. Brent crude also hit the highest level since November last year.

Further, as per U.S. Energy Information Administration (EIA) forecast, Brent crude oil price could average $93 per barrel during the fourth quarter of 2023, an increase from $86/b in August. EIA expects the price to average $87 a barrel by the second half of next year.

According to the latest International Energy Agency (IEA) Oil Market Report (OMR), global oil demand remains on track to rise by 2.2 million b/d year-over-year to 101.8 million b/d in 2023, fueled by resurgent Chinese consumption, jet fuel, and petrochemical feedstocks.

Higher oil prices, robust demand for oil and gas, and solid well productivity are major drivers for continued growth in domestic oil production. In its September Short-Term Energy Outlook, EIA forecast U.S. crude oil production to average a record high of 12.8 million b/d this year and 13.2 million b/d in 2024.

As per a report by Consegic Business Intelligence, the global oilfield services market is expected to reach $468.58 billion by 2023, growing at a CAGR of 5.9%. growing adoption of oilfield services for drilling is proliferating the market’s growth.

In addition, technological advancements in the oil and gas industry led to the development of efficient and cost-effective drilling, exploration, and production techniques. This has increased the demand for specialized oilfield services.

In light of these favorable trends, let’s look at the fundamentals of the three best Energy – Services stocks, beginning with number 3.

Stock #3: MRC Global Inc. (MRC)

MRC is a global distributor of pipes, valves, fittings, and other infrastructure products and services to energy, industrial, and gas utility end-markets. The company offers ball, butterfly, globe, check, needle, and plug valves; valve modification services; carbon steel fittings and flanges; natural gas distribution products; and oilfield and industrial supplies and equipment.

On September 27, MRC announced that its subsidiary, MRC Global (US) Inc. extended its Enterprise Framework Agreement with Shell plc (SHEL) until 2028. Under this global agreement, MRC Global would remain a key supplier of SHEL’s pipe, valves, and fittings; and ad-hoc valve actuation services for its upstream, midstream, and downstream assets.

Over the past three years, MRC’s revenue has grown at a CAGR of 4.4%. The company’s EBIT and normalized net income have increased at CAGRs of 77.3% and 321.7%, respectively, over the same timeframe.

In the second quarter that ended June 30, 2023, MRC’s sales increased 2.7% year-over-year to $871 million and its gross profit rose 15.9% from the year-ago value to $175 million. The company’s operating income came in at $45 million, up 45.2% from the prior year’s quarter.

Additionally, the company’s net income attributable to common stockholders and earnings per common share were $18 million and $0.21, increases of 125% and 133.3% year-over-year, respectively. Also, cash provided by operations was $20 million during the second quarter.

Analysts expect MRC’s revenue for the fiscal year (ending December 2023) to increase 7.1% year-over-year to $3.60 billion. The consensus EPS estimate of $1.20 for the ongoing year indicates a marginal increase from the prior year. Moreover, the company surpassed the consensus EPS estimates in three of the trailing four quarters.

MRC’s shares have gained 3.1% over the past six months and 21.3% over the past year to close the last trading session at $10.08.

MRC’s sound fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating…