The stock market has breathed a sigh of relief in recent weeks. Technical shares The sales burden has become technically heavy Nasdaq Composite Index: It has fallen by about 10% from its highest level, at some point approaching it correction area. Meanwhile, some of the tallest leaflets on the market are much lower than their last heights.
However, while some stocks are frozen, energy resources they got even hotter. Some have risen sharply this year, fueled by higher oil prices. This growth can continue if raw prices continue to cooperate.
Cash flow will flow soon
Oil prices have soared this year. West Texas Intermediate, the leading benchmark for US oil prices, has risen more than 35% this year, recently exceeding $ 65 a barrel. The world standard, Brent, is approaching $ 70 per barrel. Analysts believe that crude oil prices may stay longer. For example, Goldman Sachs: Recently, the price of Brent rose by $ 5 per barrel to $ 75 per second and $ 80 per third. Nurturing that view is OPEC’s continued support by curbing supply and the expectation that vaccines will be needed in the coming months.
This rise in oil prices is a gift to producers. Many have spent the past few years reducing their expenses. Now they are going to create a bigger wave of cash flow in 2021, as they planned close their drilling plans.
For example, Marathon oil (NYSE: MRO) WTI needs an average of $ 35 per barrel to support this year’s drilling program to keep production at last year’s level. It generates $ 1 billion in free cash flow at an average rate if the average oil price is $ 50 a barrel, or even higher. Rising oil prices this year have added about 95% to its reserves of rocket fuel. Whether the company plans to use about $ 500 million in revenue to pay off the debt, it may outperform most of the surplus by repurchasing shares with higher dividends, so its shares can continue to rise. It is still down almost 5% from the beginning of 2020, although crude oil prices are close to a two-year high.
Devon Energy: (NYSE: DVN) he is cashing in on higher crude oil prices this year. The company needs an average of just $ 32 per barrel to finance its drilling program to maintain its current production rate, thus cashing in on higher commodity prices. Devon plans to return most of its revenue to investors through it variable dividend plan. Through this framework, each quarter will pay up to 50% of its surplus cash flow. His first payment was $ 0.19 per share, more than doubling his quarterly dividends. Crude oil prices continue to rise, and future payments may be even higher. It could give its shares, which have already risen more than 60% this year, even more fuel to continue the rally, as it is still down about 1% since early 2020.
Dirt is still cheap
While shares of many oil producers have risen sharply this year, pipeline reserves have not been as hot. But they have significant upward potential as the oil market continues to recover as most trade at the lowest barrel prices.
For example, the oil pipeline master limited partnership Plains All American Pipeline (NASDAQ: PAA) expects to generate $ 1.82 per share cash flow this year. This means that the logistics business does not generate much revenue. While the Plains All American unit price has risen by about 18% this year, it has fallen by more than 40% since the beginning of 2020. Departments are currently trading at less than $ 10, which means an absurdly low price of about five times the cash flow. Back: medium flow assets Usually getting double-digit cash flow, Plains All American still has a huge growth potential from here, especially as it increases its profit margin by 7.4%.
Partner MLP: Crestwood Equity Partners: (NYSE: CEQP) is in such a boat. The Pipeline ընկերությունը company is currently expecting to generate twice as much cash as it needs to cover its 9.7% profit distribution this year. Despite gaining more than 35% this year, Crestwood points are still down more than 15% since the beginning of 2020. It trades at a dirty cheap price, about 5 times its cash flow. This is why it can have a monstrous top potential as the energy market continues to recover.
Red hot to collect more fuel
Energy stocks have risen this year due to rising crude oil prices. They may just be starting, as many are still trading at lower prices than before the epidemic, even though oil prices are approaching a two-year high. Energy investors can generate high returns as they take advantage of the industry’s high returns ս huge growth potential as market conditions continue to recover.
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