Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
After the global stock market experienced “Black Monday”, the oil and gas stocks also fell significantly. Investors are concerned that if there is a recession ahead, the demand for oil and gas will decline.
However, by the close of trading on Friday (9 August), the S&P GSCI Crude Oil Index had risen about 3% since Monday and was still 2% above Friday’s close, showing the resilience of stocks in the sector.
Considering that shares of many industries are still down for the year, now might be a good time to pick up the slack at lower levels. Here are two oil and gas stocks to consider buying now.
Exxon Mobil Exxon Mobil (NYSE:XOM) is the largest integrated oil and gas company in the U.S., and it’s very profitable. Second-quarter earnings showed a 17% increase in profit to $9.2 billion, one of the company’s highest profit levels ever; average earnings per share were $2.14, well above Wall Street’s forecast of $2.02.
The profit growth was largely due to increased production in the oil-rich Permian Basin. The company has become the largest oil company in the Permian Basin after acquiring Pioneer Natural Resources last year. Management aims to increase oil and gas production in the region by 50 per cent by 2027.
However, the company’s overall refining margins have shrunk from last year due to low natural gas prices. It’s worth pointing out that as a major producer with valuable upstream, midstream and downstream assets, ExxonMobil also pays a dividend that yields 3.3% annually, making the energy giant one of the best oil and gas stocks to buy right now.
Enbridge (TSX:ENB) is a leader in Canada’s energy infrastructure industry, with a current market capitalisation of C$115.9 billion, making it the third-largest company by market capitalisation on the Toronto Stock Exchange, while offering shareholders a generous dividend yield of up to 6.9%.
As of the close of trading on 8 August 2024, this energy stock is up 15.9% year-to-date, outpacing the average overall return of the energy sector and the 6.1% year-to-date return of the broader market.
Most importantly, the quarterly dividend has been increasing every year. Enbridge is a dividend aristocrat, having raised its dividend for 29 consecutive years, with the most recent dividend increasing by 3.1 per cent.
Some market analysts are concerned about the company’s debt levels and capital-intensive operations, fearing that accidents such as pipeline leaks could hit profits and cause the stock to plummet.
However, in addition to Enbridge’s responsible for transporting 30 per cent of crude oil production and 20 per cent of natural gas consumed in North America, the company now owns the largest utility assets in North America, having recently acquired several U.S. natural gas utility firms. With growing investments in renewable energy, it will be able to provide more clean energy in the future.
In addition to its size and diversified portfolio, Enbridge maintains a low-risk commercial and financial profile. In addition, cash flows are predictable as cost of service or contract assets account for approximately 98 per cent of EBITDA. The utility-like business model and stable, diversified cash flows mitigate concerns about debt leverage. Management has raised its financial outlook for the full year 2024, with adjusted EBITDA guidance increasing from C$17.7 billion to C$18.3 billion.
