The price of oil is on the march again, prodded upward by concerns about disruption in supply because of unrest in Africa and the Middle East, but also by optimism that growth in the U.S. economy will boost demand.
Prices for West Texas Intermediate oil have gained more than 5 percent this month. With that in mind, the Money and Markets Team had a look at the Weiss Ratings for energy-related stocks, listed below.
The top five are service providers to oil exploration and development companies; these companies benefit from increased demand with less risk than the seekers and drillers of oil and gas.
A bonus: As Barron’s put it in an article earlier this month: “John Person, president of NationalFutures.com and co-author of the Commodity Traders Almanac, points out that starting in February and running through mid-April, these groups tend to outperform the market.”
1. Helmerich & Payne, Inc. (Rating: A+)
This Tulsa-based company tops the energy sector ratings this week. Helmerich & Payne’s bread and butter is contract drilling for oil and gas wells for oil explorers and producers, and it claims to be one of the major land and offshore platform drilling contractors in the world, with contracts in the U.S., Latin America, the Middle East, Africa and the Gulf of Mexico.
The company’s shares have gained more than 36 percent in the past year and more than 50 percent over the past three. Its P/E ratio is 15.12, and 0.89 relative to the S&P 500 Index.
Earnings per share in the latest quarter beat consensus estimates, rising 11.4 percent. The company has topped estimates for about the past seven quarters.
2. Magellan Midstream Partners LP (Rating: A+)
Also based in Tulsa, Magellan Midstream claims to own the largest refined petroleum products pipeline system in the U.S., “with access to more than 40 percent of the nation’s refining capacity.” It also provides storage of crude oil and refined products like gasoline and diesel fuel.
The partnership posted record earnings for 2013, and increased distributions to shareholders by 16 percent.
Its shares have gained about 40 percent in the past year, hitting a 52-week high earlier this month. Its P/E ratio is 25.89, and 1.51 relative to the S&P 500 Index.
3. Matrix Service Co. (Rating: A)
Matrix Service Co.’s services include engineering, construction, maintenance and repair to oil, gas, chemical and other companies.
Also based in Tulsa, Matrix’ shares have doubled in the past year, rising to an all-time high earlier this month after the company reported earnings in line with estimates and a 40 percent increase in revenue in the last quarter, and raised its revenue and earnings guidance for the full fiscal year.
Matrix recently bought Kvaerner North American Construction, and that’s expected to add to earnings.
Matrix’s P/E ratio is about 26 and 1.55 vs. the S&P 500 Index. It’s a small-cap company with about $845 million in market capitalization.
4. Adams Resources & Energy (Rating: A)
Here’s one you probably haven’t heard of: Based in Houston, Adams Resources & Energy’s main business is marketing crude oil, natural gas and petroleum products, but it also explores and produces oil and gas, and provides transportation for liquid chemicals.
The shares have jumped about 88 percent in the past year, but its P/E ratio is still lower than others on the list: 9.8542, and 0.6 vs the S&P 500. Its market capitalization is about $285 million.
Adams Resources & Energy hasn’t yet reported earnings from the last quarter.
5. Bristow Group Inc. (Rating: A)
Bristow Group is the company that gets the offshore drillers to work, and it claims to be the leading provider of helicopter services to offshore energy companies, with its fleet providing about one-third of those servicing the global oil and gas industry. It has operations in the North Sea, Nigeria, the Gulf of Mexico, and in most of the major offshore oil and gas producing regions, such as Brazil, Canada and Russia.
The shares of Houston-based Bristow have gained about 32 percent in the past year, and have increased about 15 percent since it reported earlier this month that it’s buying a U.K.-based regional airline, saying it’s interested in expanding its service of getting workers to the hub of U.K. oil and gas industry in Aberdeen, Scotland, where Bristow was originally based.
About Weiss Ratings: The Weiss Ratings Model objectively weighs the risk and reward of investing in stocks traded on U.S. exchanges. The ratings range from A+ (excellent) to E (very weak). While A and B are equivalent to a “buy” rating, a C rating is a “hold,” and D and E are equivalent to “sell.” The ratings are updated daily. The ratings are intended as investment tools, but not necessarily as investment recommendations in and of themselves.
The Money and Markets Team