The oil and gas industry has been recovering since the second half of 2020 as countries around the world strive to reopen their industrial and manufacturing sectors. OPEC’s voluntary production cuts and rising global demand led to a steady rise in oil prices in the first quarter. As the difficult coronavirus situation in India derails oil prices from their recent highs, the broader outlook for the oil industry is bright. The market for oil and gas asset integrity management services is expected to grow at a CAGR of 8.7% over the next five years.
Typically engaged in the oil and gas industry, Master Limited Partnerships (MPL) typically provide the tax benefits of a partnership, combined with the liquidity of publicly traded securities, allowing them to offer high returns to investors. . These companies are likely to attract the attention of income investors in the context of current market volatility. Strong demand for crude oil inventories is evidenced by iShares US Oil & Gas Exploration & Production ETFs (IEO) 96.7% returns over the past six months vs. S&P 500 Trust ETFs (TO SPY) 27.8% gains over the period.
Based on these factors, we believe that Western Midstream Partners, LP (WE S), Global Partners LP (GLP) and Star Group, LP (SGU) are now ideal investment bets.
Western Midstream Partners, LP (WE S)
WES operates, acquires and develops intermediate energy assets primarily in the United States. This MLP is engaged in the collection, compression, treatment, treatment and transportation of natural gas, the collection, stabilization and transportation of condensates, natural gas liquids (NGLs) and crude oil, as well as the collection and disposal of produced water.
On May 14, WES is expected to distribute quarterly cash of $ 0.32 per unit, which represents a sequential increase of 1.3%. This payout is consistent with the company’s annualized 5% distribution growth. The stock distributed $ 1.26 in dividends annually, which translates into a dividend yield of 6.4%.
On March 22, WES announced a secondary public offering of 10 million shares. The company is expected to raise $ 173.5 million in gross proceeds from the offering.
WES operating profit increased 11.8% year over year to $ 372.95 million for the fourth quarter, ended December 31, 2020. Its adjusted gross profit increased is set at $ 648.40 million, which is significantly higher than the previous year. Its net income increased 7% sequentially to $ 263.89 million. In addition, its EPS rose 12.7% sequentially to $ 0.62.
A consensus EPS estimate of $ 0.62 for the third quarter, ending September 30, 2021, represents a 9.5% year-over-year improvement. WES has exceeded consensus EPS estimates in each of the past four quarters. The consensus estimate of revenue of $ 2.78 billion for the fiscal year ending December 2022 represents a 6.7% year-over-year increase.
The stock has gained 126.3% in the past year and 141% in the past six months. WES closed Friday’s trading session at $ 19.64.
WES ‘strong fundamentals are reflected in its POWR odds. The stock has an overall B rating, which is equivalent to Buy in our proprietary rating system. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
The stock has a B grade for quality. We also rated WES for value, growth, momentum, stability and sentiment. Click on here to access all WES classifications.
WES is ranked n ° 6 out of 40 shares in category B MLP – Oil and Gas industry.
Global Partners LP (GLP)
GLP is an intermediary logistics and marketing company. The company operates in three segments: wholesale, gasoline distribution and station operations and trading. It is engaged in the purchase, sale, storage and transportation logistics of petroleum and related products, including stocks of gasoline and gasoline blends, distillates, residual oil, renewable fuels, crude oil, natural gas and propane.
GLP is expected to distribute quarterly cash of $ 0.58 per unit on May 14, indicating a sequential increase of 4.5%. The stock distributed $ 2.30 in dividends annually, which translates into a 9.5% dividend yield.
On April 26, GLP declared a cash distribution of $ 0.61 per unit on the Company’s 9.75% cumulative fixed and variable rate perpetual redeemable preferred units, Series A, and $ 0.34 per unit on its perpetual preferred units at a fixed rate and redeemable at a fixed rate of 9.50%, Series B, payable on May 17.
GLP valued a placement of 3 million preferred units on March 17 at $ 25 per unit. The company intends to use $ 75 million of gross proceeds from this offering to reduce its debt burden under a credit agreement.
For the fourth quarter ended December 31, 2020, GLP’s gross profit was $ 166.21 million, representing a 10.1% year-over-year increase. GLP’s operating profit was $ 32.69 million, up more than 58% from the prior year period. The company’s net income for the quarter was $ 4.44 million, compared to a net loss of $ 828,000 in the fourth quarter of 2019. In addition, its EPS was $ 0.06 for the quarter, compared to a loss of $ 0.08 per share during the prior year period.
Analysts expect GLP’s EPS to improve 14.5% year-over-year for the third quarter, ending September 30, to $ 0.57. It has beaten the street’s EPS estimates in three of the past four quarters. The consensus estimate of revenue of $ 3.80 billion for the second quarter (ending June 30, 2021) represents a 158.4% year-over-year increase.
The stock has gained 102.6% in the past year and over 160% in the past nine months.
GLP’s POWR ratings reflect this promising outlook. The stock has an overall B rating, which is equivalent to buying into our POWR rating system.
The stock has an A rating for value and a B rating for sentiment. In addition to the POWR ratings we just outlined, we can see GLP ratings for momentum, growth, quality and stability. here.
GLP is ranked # 3 in the same industry.
Star Group, LP (SGU)
SGU is a service energy provider to residential and commercial customers in the United States. It sells diesel, gasoline and heating oil on a delivery-only basis, as well as plumbing services. He also installs, maintains and repairs heating and air conditioning equipment.
SGU increased its quarterly distribution by 7.5% sequentially to $ 0.14, payable May 11. The stock paid $ 0.57 in dividends per year, which translates to a dividend yield of 5.4%.
For the first quarter of fiscal 2021, ended December 31, 2020, SGU’s total sales increased 103.7% sequentially to $ 373.32 billion. The company’s operating profit was $ 54.79 million, representing a 29.1% year-over-year increase. Its net income was $ 37.86 million for the quarter, up 36.4% from the prior year period. In addition, its EPS rose more than 51% year over year to $ 0.74.
It has gained 34.1% over the past year to close Friday’s trading session at $ 10.59.
It’s no surprise that SGU has an overall A rating, which equates to a strong buy in our POWR rating system.
The stock has an A rating for value and quality and a B rating for growth and stability. Click on here to see additional notes for SGU (Momentum and Sentiment).
SGU is ranked No. 1 in the same sector.
WES shares were trading at $ 19.91 per share on Monday afternoon, up $ 0.27 (+ 1.37%). Year-to-date, WES has gained 49.39%, compared to a 12.22% increase in the benchmark S&P 500 over the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a particular interest in detecting market inefficiencies. She is passionate about educating investors so that they can be successful in the stock market. After…