Unless you've been living under a rock for the past 6 weeks, you are painfully aware of recent events in eastern Europe. That story is unfortunately taking a big turn for the worse over the past 24 hours as Russia mobilizes and crosses over the border into Ukraine.
For investors, the news has been very rough on stocks. But it has also been perversely beneficial for those exposed to a few key assets - most prominently Oil, Gold, and the Japanese Yen.
Of those three, the Crude Oil story is the most compelling because the move by Russia is only one of many forces conspiring right now to drive the most powerful bull market in oil in a decade.
Probably the most important driver for oil right now is the peculiar inelasticity we are seeing among producers - that's a fancy economist term for a market where supply is not reacting to rising prices according to the standard supply/demand curve you know so well from Econ 101. In other words, as the price of oil rises, oil companies aren't really producing much more oil. This was covered in detail in a recent Wall Street Journal article.
That dynamic acts as a feedback loop pushing the price higher and higher. As a result, so far this year, the list of the 20 best performing stocks in the market contains almost nothing but oil companies. And there is little indication that leadership board will change over the coming period, especially if Russia keeps the pressure on, threatening to drive sanctions that could further inhibit crude oil supplies on the market in the weeks ahead. With that in mind, we take a look below at some of the most interesting stocks in the Oil space.
Halliburton Co. (NYSE:HAL) engages in the provision of services and products to the energy industry related to the exploration, development and production of oil and natural gas. The company operates through its Completion and Production and Drilling and Evaluation segments. The Completion and Production segment delivers cementing, stimulation, intervention, pressure control, specialty chemicals, artificial lift, and completion services. The Drilling and Evaluation segment provides field and reservoir modeling, drilling, evaluation, and wellbore placement solutions that enable customers to model, measure and optimize their well construction activities. Halliburton Co. (NYSE:HAL) recently announced that it has added two new advisory board members - Jennifer Holmgren, CEO, LanzaTech and Maynard Holt, CEO, Veriten. Each brings significant experience in energy systems, innovation, and business networks to support Halliburton Labs' collaborative environment where entrepreneurs, academics, and investors join to advance cleaner, affordable energy.
"We are excited to welcome two exceptional leaders who will provide a wealth of expertise as we advance our work to help early-stage companies achieve their growth targets," said Dale Winger, managing director of Halliburton Labs. "Our team is grateful for Jennifer and Maynard's deep knowledge across a variety of energy disciplines and commitment to our mission."
Traders will note 17% added to share values of the listing over the past month of action. The situation may be worth watching. HAL has evidenced sudden upward volatility on many prior occasions. What's more, the listing has witnessed a pop in interest, as transaction volume levels have recently pushed 47% over the long run average.
Halliburton Co. (NYSE:HAL) has earned a current market cap value of $29 billion, with a significant war chest ($3B) of cash on the books, balanced by about $4.3B in total current liabilities. HAL is pulling in trailing 12-month revenues of $15.3B. In addition, the company is seeing major top-line growth, with y/y quarterly revenues growing at 32.1%.
Viking Energy Group Inc. (OTC US:VKIN) is a more speculative name in this group, but it has significant and growing oil and gas production operations according to its disclosures. We point it out here because the stock has been sharply lagging the larger group and could be interesting as an overlooked deep value opportunity for investors willing to speculate on smaller players in a red-hot group. VKIN has proven oil and gas assets valued at over $96 million located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. It has also been expanding into other energy themes, including carbon capture, storage, and electricity grid operations through strategic activity, including through its majority owner, Camber Energy Inc (NYSE American:CEI). Viking Energy Group Inc. (OTC US:VKIN), as an example of this diversification, announced on February 15 that it has acquired a 51% interest in entities that own the intellectual property rights to fully developed, patent pending, ready-for-market proprietary Electric Transmission and Distribution Open Conductor Detection Systems designed to detect a break in a transmission line, distribution line, or coupling failure, and to immediately terminate the power to the line before it reaches the ground.
The company noted in its communications that the systems are designed to detect a break in a transmission line, distribution line, or coupling failure, and to immediately terminate the power to the line before it reaches the ground. The technology will dramatically increase public safety and reduce the risk of causing an incendiary event, and is designed to be integral component within a much-needed, worldwide grid hardening and stability initiative by electric utilities to improve resiliency and reliability of existing infrastructure.
The stock has not reacted much to the news. But that could change as the market catches on, especially given the company's existing exposure to the oil and gas space.
Viking Energy Group Inc. (OTC US:VKIN) President and Chief Executive Officer James A. Doris further commented, "This technology is extremely important. It truly is difficult to put a monetary value on a solution that can sense a broken power line and cut the electricity flowing through the line before the wire hits the ground. Arcing and sparking energized power lines are hazardous, and difficult to detect using traditional concepts. Unfortunately, people in places like California, Western Canada, Australia, and other parts of the world are fully aware of what can happen when a downed, energized power line makes contact with the ground. The damage caused by these wildfires has been catastrophic. We have already begun discussions with major utilities in California and global equipment manufacturers for deployment. Our solution can be quickly and cost-effectively deployed in high-risk areas first, then utilized more broadly by all utility companies to help reach their grid hardening goals."
Hess Corp. (NYSE:HES) bills itself as an exploration and production company, which engages in exploration, development, production, transportation, purchase & sale of crude oil, natural gas liquids and natural gas with production operations. The company's Midstream segment provides fee-based services including crude oil and natural gas gathering, processing of natural gas and the fractionation of natural gas liquids, transportation of crude oil by rail car, terminaling and loading crude oil and natural gas liquids, and the storage and terminaling of propane, primarily in the Bakken shale play of North Dakota.
Hess Corp. (NYSE:HES) recently announced the startup of production from the Liza Phase 2 development on the Stabroek Block offshore Guyana, utilizing the Liza Unity floating production, storage and offloading (FPSO) vessel. The Liza Unity is expected to reach its production capacity of 220,000 gross barrels of oil per day later this year as operations are safely brought online.
"We are proud to be a partner in the successful development of this world class oil resource and congratulate ExxonMobil as operator for outstanding project execution," CEO John Hess said. "We look forward to continuing to work with the Government and the people of Guyana to realize the remarkable potential of the Stabroek Block for the benefit for all stakeholders. The world will need these low-cost oil resources to meet future energy demand and help ensure an affordable, just and secure energy transition."
While this is a clear factor, it has been incorporated into a trading tape characterized by a pretty dominant offer over recent days, which hasn't been the type of action HES shareholders really want to see. In total, over the past five days, shares of the stock have dropped by roughly -2% on above average trading volume. But this comes in the context of a rip-roaring rally that has taken HES shares higher by nearly 25% this year.
Hess Corp. (NYSE:HES) managed to rope in revenues totaling $2.2B in overall sales during the company's most recently reported quarterly financial data — a figure that represents a rate of top line growth of 85%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($2.7B against $3.1B, respectively).
Other top stocks in the Oil and Gas space include Schlumberger Ltd. (NYSE:SLB), Occidental Petroleum Corp. (NYSE:OXY), EOG Resources Inc. (NYSE:EOG), APA Corp. (Nasdaq:APA), and ConocoPhillips (NYSE:COP).
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