Chicago, IL – April 10, 2025 – Today, Zacks Equity Research discusses ConocoPhillips COP, Occidental Petroleum Corp. OXY, National Fuel Gas Co. NFG and Epsilon Energy Ltd. EPSN.
Industry: Energy
Link: https://www.zacks.com/commentary/2442608/4-energy-stocks-to-gain-from-the-prospering-integrated-us-industry
Although crude prices have declined significantly, the pricing environment is still favorable for exploration and production activities. Furthermore, integrated energy firms' midstream segments continue to perform well, thanks to consistent revenues from fees associated with pipeline and storage facilities. This strong performance enhances the outlook for the Zacks Oil & Gas US Integrated industry.
Leading contenders in the industry poised to capitalize on this favorable business environment include ConocoPhillips, Occidental Petroleum Corp., National Fuel Gas Co. and Epsilon Energy Ltd.
The Zacks Oil & Gas US Integrated industry comprises companies primarily involved in upstream and midstream energy businesses. The upstream operations entail oil and natural gas exploration and production in the prolific shale plays of the United States. The integrated energy companies are also engaged in midstream businesses through gathering and processing facilities along with transportation pipeline networks and storage sites.
Overall, the upstream business is positively correlated to oil and gas prices. The produced commodity volumes are transported through midstream assets, generating stable fee-based revenues. The integrated energy players in the United States also have access to downstream operations wherein the transported oil volumes are converted to finished products, comprising gasoline, natural gas liquids and diesel, through refining activities.
Oil Prices Still Favorable: Although oil prices have plunged recently, the breakeven price in most shale plays in the United States, including Permian, is significantly lower than the current oil price. It seems that upstream operations are still profitable for most of the companies belonging to the industry.
Stable Fee-Based Revenues: Integrated companies’ midstream businesses are relatively less exposed to the volatility in commodity prices. This is because pipeline and storage assets are usually booked by shippers for the long term, securing stable fee-based revenues.
Strong Focus on Lowering Emissions: Integrated players in the industry, with operations spreading across the United States and abroad, have recognized climate change as a serious risk that needs to be addressed. The companies are now focused on reducing greenhouse gas emissions and flaring rates.
The Zacks Oil & Gas US Integrated industry is a 15-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #78, which places it in the top 32% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.
The Zacks Oil & Gas US Integrated industry has underperformed the broader Zacks Oil - Energy sector and the Zacks S&P 500 composite over the past year.
The industry has plunged 31.8% over this period compared with the broader sector’s decline of 18% and the S&P 500’s fall of 1.7%.
Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt.
Based on the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 4.61X, lower than the S&P 500’s 14.66X. It is, however, higher than the sector’s trailing 12-month EV/EBITDA of 4.09X.
Over the past five years, the industry has traded as high as 14.35X and as low as 3.33X, with a median of 5.02X.
ConocoPhillips
COP has achieved a promising production outlook by leveraging its extensive drilling inventory and diversified upstream assets. Compared to composite stocks belonging to the industry, the leading upstream energy company has considerably lower exposure to debt capital. This reflects that the company, currently carrying a Zacks Rank #3 (Hold), is better positioned to rely on its strong balance sheet to withstand any adverse business scenario.
Occidental Petroleum
Occidental Petroleum, with a Zacks Rank of 3, is a leading energy company with a significant footprint in prolific shale plays in the United States, comprising the Permian and DJ basins, and offshore Gulf of America. OXY’s reserve replacement in 2024 was 230%, meaning the company added more oil and natural gas than it utilized last year.
National Fuel Gas
National Fuel Gas is not only involved in developing its huge core resources in the prolific Marcellus and Utica shale plays but also in the expansion of its pipeline networks. NFG also has a huge utility customer base. With a solid track record of dividend payments for as high as 122 years, National Fuel Gas, sporting a Zacks Rank #1 (Strong Buy), is highly committed to returning capital to shareholders. You can see the complete list of today’s Zacks #1 Rank stocks here.
Epsilon Energy
Being an on-shore independent natural gas and oil company, Epsilon Energy is well placed to capitalize on mounting clean energy demand. Its upstream operations are spread across the prolific Marcellus Shale and Permian basin. Having a 35% interest in the Auburn Gas Gathering System, EPSN generates stable cash flows. The company, carrying a Zacks Rank #2 (Buy), is debt-free and has $45 million available on its undrawn revolving credit facility.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
ConocoPhillips (COP) : Free Stock Analysis Report
Occidental Petroleum Corporation (OXY) : Free Stock Analysis Report
National Fuel Gas Company (NFG) : Free Stock Analysis Report
Epsilon Energy Ltd. (EPSN) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
