Investing: Energy plays for long-term investors

Investing: Energy plays for long-term investors

[Music] energy stocks underperforming the broader Market in today’s session though it does remain one of the year’s best performing sectors we’re looking at how to navigate the big picture with the Yahoo finance Playbook to discuss we’re joined by Stuart Glickman energy Equity analyst and Deputy research director at cfro energy analyst excuse me alongside Sarah hunt Chief Market strategist and portfolio manager at Alpine Saxon Woods Stuart we’re going to start with you here and just kind of get straight to what might be some of the winners as we look at an energy sector that’s already had a pretty decent run this year right Julie so thanks for having me so I think if you’re going to think about where to play energy you have to start first and foremost with what is your outlook for crude oil prices because seven out of every 10 barrels of oil equivalent are coming from the liquid Side Of The Ledger and crude last year averaged $78 a bar it’s for West Texas intermediate the US Benchmark we think this year probably somewhere in the neighborhood of 80 to 90 um will be the average for the year and in that kind of environment I think you want to be positioned with Upstream the folks that benefit directly from the price of the barrel of oil when they sell it um start with the biggest name in the business Exxon Mobile we have a four stars or buy opinion on Exxon they have relatively stronger exposure to crude oil than their Chief Rial of Chevron um a lot of growth potential coming out of Exxon in the next couple of years particularly from Guyana uh awful lot of um growth potential offshore there uh so we like Exxon their balance sheet is in incredible shape uh plus you’re going to get you know um the dividend plus you’re going to get benefit from BuyBacks Sarah same question to you talk about the energy sector big sector obviously a lot of sub sectors there are verticals to think about but kind of big give me your 30,000 foot View Sarah you know looking ahead here bullish on the sector generally bullish on the sector generally I would say that one of the issues has been you’re coming out of the pandemic Supply and I mean demand just dropped off the face of a cliff Supply stay pretty okay we’re starting to see some of those Dynamics change and I think you’re starting to absorb a lot of that Supply so I think from a longer term perspective we like it we think there’s a much longer tail on hydrocarbons Than People expect there to be even though there is an energy transition underway and the big guys are getting bigger and Sarah in many cases right we’ve seen Acquisitions happening um Exxon Pioneer um Chevron trying to acquire H we’ll see how that ends up working out is there going to be strength in size when it comes to to EMP I think there’s absolutely strength and size and you’ve also seen consolidation on the service sector so when your suppliers are consolidating and you consolidate then you can meet each other in a more equal way but there’s been an enormous amount of consolidation in the energy patch I’ve been around for quite a while in that group and there’s the number of companies left is a lot smaller than it was if you looked at it five or 10 years ago and Stuart kind of you know similar theme I want to get your take on you know obviously we talk about the energy sector here a lot of m&a Steward I’m interested whether you see that activity continuing and if so any any potential takeout Targets in your coverage Universe Stuart right Josh so you’re right m&a has been really prolific this year the the common theme to a lot of the mergers but not all of them has been exposure to the peran Basin and where are you seeing in particular is companies that are buying up acreage that’s adjacent to their own uh Exxon and and Pioneer for example that’s that’s a fair piece of I think the value of why uh Exxon went after Pioneer when you buy up the adjacent agage now you can run longer laterals and reduce your unit cost when you’re doing that unconventional Shale development uh like Exxon does um I do think this is likely to persist and I think Sarah’s point that um uh you know the recovery on the demand side is really I think in full in full swing and this industry has done a has really kind of underinvested in new supply for the better part of the last seven or eight years and that’s going to come home to Roose we’re just simply not going to have enough Supply probably through the end of this decade and I think that keeps prices elevated and Sarah I I want to touch on the other big theme Here you mentioned hydrocarbons have a longer tail than people thought but most of these companies are also investing in you know sort of carbon captur Technologies looking towards a post hydrocarbon or a less hydrocarbon world is that though when you’re investing in these companies is that part of your thesis is that something you’re looking for or are you still focusing on you know the what’s happening now I would say that it has to be an and because there is going to be a transition and so you want the companies that are taking it seriously and spending money doing it you don’t want them indiscriminately throwing money away but you want to look at companies who are trying to figure F out how to position themselves Andor how to make things cleaner faster better than they were because that’s obviously an issue for the entire industry so it’s definitely a piece of that and then you look at some of the transition fuels like LNG and you look at some of the companies that play into that area as well I think you’re going to see that’s going to become important even more important as well as that really starts to become globalized it’s still a bit landlocked in different places um and we got startart to talk about some of his names what are some of your preferred names in the industry well we also so like some of the service names too so um Tidewater there’s been a huge consolidation in the and in the boats that service all the offshore oil rigs and all of the um General offshore production uh we also like Slumber and we like kico Phillips and and even though Exxon has done better than Chevron we like Chevron as well do you think that the H deal will get done it’s always a question with m&a and I think it’s a big question right now with the FTC because they keep asking for more information even in areas where that didn’t used to be so much of an issue so they’re very very confident Tess is confident chevron’s confident can anything happen absolutely so you don’t want to absolutely count on that for the only thing that’s going on but I think that you’ve got it’s just a very different industry than you used to have return on invested capital is important Dividends are important they don’t stretch their balance sheets the way they used to it’s a much different industry all right thanks to you both so much really interesting stuff sarin Stewart thank you both for joining us

The energy sector (XLK) has continued to outperform throughout 2024. Alpine Saxon Woods Chief Market Strategist Sarah Hunt and CFRA Energy Equity Analyst and Deputy Research Director Stewart Glickman join Market Domination to share insight on navigating this sector.
Glickman emphasizes that investors looking to capitalize on the energy sector should first consider their outlook for crude oil prices. He believes that with crude oil prices are expected to average between $80 and $90 per barrel in 2024: “In that kind of environment, you want to be positioned in upstream,” the analyst tells Yahoo Finance. He recommends exploring names like Exxon (XOM), citing “a lot of growth potential.” With an uptick in mergers and acquisitions (M&A) activity throughout the sector, Glickman notes that the “common theme” is exposure to the Permian Basin, a trend he believes is “likely to persist.”
Hunt acknowledges that supply and demand issues have been a headwind for the sector since the pandemic. However, with an “energy transition underway” she remains bullish on energy “from a longer-term perspective.” She also highlights the significant consolidation within the sector, with companies combining forces to boost operations and enhance their competitive edge.
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