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The oil and gas industry is poised for a strong beginning in 2024, primarily attributed to its robust financial position and elevated oil prices. The industry’s resilience is expected to provide financial backing for investments and dividends. This will support its disciplined capital programs and a strategic focus on shareholder interests.
Maintaining a secure balance sheet and holding substantial cash reserves is imperative, especially in the cyclical Oil/Energy sector. A strong financial foundation not only enhances a company’s valuation but also serves as a protective buffer during downturns in the industry. Also, regular dividends can be a sign of a company's strong financial health and its ability to generate cash.
Amid dynamic market shifts and technological advancements, investors with foresight are closely monitoring stocks within the energy sector that have the potential to outperform the market in 2024.
Here are four energy stocks, chosen based on their innovation, market position and financial health, which show promising prospects. All four companies mentioned below currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Liberty Energy LBRT offers hydraulic fracturing services to onshore upstream energy companies across multiple basins in North America. The company’s total assets grew from $2.6 billion as of Dec 31, 2022, to $3 billion as of Sep 30, 2023. This demonstrates a robust balance sheet and efficient asset management.
Liberty is in a commendable financial position. As of Sep 30, 2023, the company had approximately $27 million in cash and cash equivalents, supported by its revolving credit facility. Notably, Liberty’s debt-to-capitalization ratio is a mere 11.1%, in stark contrast to many peers grappling with significantly higher debt levels, constituting 50% of their total capital structures.
Liberty has experienced a substantial dividend growth of 70% over the past year. This suggests that the company is actively increasing its dividend payments, which can be attractive to income-seeking investors. LBRT offers an annual dividend of 28 cents per share.
Chevron Corporation CVX is one of the largest publicly traded oil and gas companies operating across diverse regions worldwide. This San Ramon, CA-based company is fully integrated, engaging in every facet of the energy sector, encompassing oil production, refining and marketing.
CVX’s robust financial position is evident in its clean balance sheet, characterized by a relatively low debt-to-equity ratio. As of Sep 30, Chevron has $5.9 billion in cash and cash equivalents, with a total debt of $20.6 billion and a conservative debt-to-total capitalization ratio of 11%. This financial strength has earned Chevron a high investment-grade rating of AA from S&P 500, resulting in favorable borrowing rates.