The ongoing conflicts in the Middle East have significantly impacted the supply and demand of oil and gas across the globe. Due to the constrained supplies, world oil and gas demand is expected to see unprecedented growth.

Given the industry tailwinds, it could be wise to invest in fundamentally sound energy stocks Cenovus Energy Inc. (CVE), Suncor Energy Inc. (SU), and Energy Transfer LP (ET) for gains amid global demand.

In its recent short-term energy outlook, EIA expects an increase of over 1.0 million barrels per day (b/d) in global consumption of liquid fuels this year, and stronger growth is projected in the next year, with global oil consumption rising by 1.2 million b/d.

Also, escalating geopolitical risks in the Middle East and withdrawals from global oil inventories stemming from OPEC+ production cuts are likely to pressure oil prices upwards over the next few months, with the Brent crude oil price averaging $78 per barrel (b) in the first quarter of 2025.

EIA also forecasts that the world oil demand will expand by 920 kb/d in 2024 and by 1 mb/d in 2025, respectively, to 102.8 mb/d and 103.8 mb/d.

Further, global demand for natural gas has also been increasing at a faster rate this year compared to the previous two years. Global gas demand is anticipated to rise by more than 2.5% in 2024, and a similar rate is expected in 2025, driven by demand from fast-growing markets.

With these encouraging trends in mind, let’s delve into the fundamentals of the three Energy – Oil & Gas stock picks, beginning with the third choice.

Stock #3: Cenovus Energy Inc. (CVE)

Headquartered in Calgary, Canada, CVE develops, produces, refines, transports, and markets crude oil, natural gas, and refined petroleum products in Canada and internationally. It operates in Oil Sands; Conventional; Offshore; Canadian Refining; and U.S. Refining segments.

On October 31, CVE’s Board of Directors declared a quarterly base dividend of $0.18 per common share, payable on December 31, 2024, to shareholders of record as of December 13, 2024.

Also, the Board declared a quarterly dividend on each of the cumulative redeemable first preferred shares as follows: $0.16 on Series 1, $0.37 on Series 2, $0.29 on Series 3, $0.287 on Series 5 and $0.24 on Series 7, payable on December 31, 2024, to shareholders of record as of December 13, 2024.

CVE’s annual dividend of $0.63 translates to a yield of 3.72% at the current share price. Its four-year average dividend yield is 1.45%. Further, the company’s dividend payouts have increased at a CAGR of 123.5% over the past three years.

During the third quarter that ended September 30, 2024, CVE reported revenues of C$14.25 billion ($10.19 billion) and its earnings before income tax was C$1.02 billion ($732.59 million). Its net earnings came in at C$820 million ($586.64 million) and C$0.42 per common share for the quarter, respectively.

In addition, the company’s adjusted funds flow stood at C$1.96 billion ($1.40 billion) and C$1.05 per share, respectively.

Street expects CVE’s EPS for the fourth quarter (ending December 2024) to increase 25.1% year-over-year to $0.35, and its revenue for the ongoing quarter is expected to grow 15.9% year-over-year to $11.31 billion. Also, the company has surpassed the consensus revenue estimate in three of the trailing four quarters.

CVE’s stock has slumped 5.1% over the past month to close the last trading session at $16.16.

CVE’s solid fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

CVE has a B grade for Quality. It is ranked #13 out of 77 stocks in the Energy – Oil & Gas industry.

In addition to the POWR Ratings we’ve stated above, we also have CVE ratings for Sentiment, Growth, Value, Momentum, and Stability. Get all CVE ratings here.

Stock #2: Suncor Energy Inc. (SU)

Based in Calgary, Canada, SU operates as an integrated energy company internationally. The company operates in Oil Sands; Exploration and Production; and Refining and Marketing segments. The company explores, develops, and produces bitumen, synthetic crude oil, and related products.

On November 12, SU’s Board of Directors approved a quarterly dividend of $0.57 per common share, reflecting an increase of 5% over the prior quarterly dividend. The dividend will be paid on December 24, 2024, to shareholders of record at the close of business on December 3, 2024.

SU pays an annual dividend of $1.63, which translates to a yield of 3.98% at the current share price. Its four-year average dividend yield is 4%. Moreover, the company’s dividend payouts have increased at a CAGR of 33.9% over the past three years.

For the third quarter that ended September 30, 2024, SU reported adjusted operating earnings of C$1.87 billion ($1.34 billion) or C$1.48 per common share, respectively. The company’s adjusted funds from operations stood at $3.79 billion ($2.71 billion) and C$2.98 per common share, up 4.2% and 6.4% from the prior year’s quarter.

Furthermore, the company’s free funds flow rose 8.5% year-over-year to C$2.23 billion ($1.60 billion).

Street expects SU’s revenue for the first quarter (ending March 2025) to increase 4.1% year-over-year to $9.50 billion, and its EPS for the same period is expected to be $0.62. Furthermore, the company surpassed the consensus EPS estimates in all of the trailing four quarters.

SU’s stock has surged 4.2% over the past month and 22% over the past year to close the last trading session at $40.83.

SU’s bright prospects are reflected in its POWR Ratings. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.

The stock has an A grade for Quality and a B grade for Stability and Momentum. SU is ranked #7 among 77 stocks in the same industry.

Click here to access SU’s ratings for Growth, Value, and Sentiment.

Stock #1: Energy Transfer LP (ET)

ET is an energy-related services provider. It operates natural gas transportation pipelines, natural gas storage facilities in Texas and Oklahoma, and nearly 20,090 miles of interstate natural gas pipeline.

On October 28, ET increased its quarterly cash distribution to $0.32 per common unit for the third quarter ended September 30, 2024, representing an increase of 3.2% as compared to the third quarter of 2023. The cash distribution was paid on November 19, 2024, to unitholders of record as of the close of business on November 8, 2024.

ET’s annual dividend of $1.29 translates to a yield of 7.06% at the current share price. Its four-year average dividend yield is 8.19%. And its dividend payouts have increased at 27.9% CAGR over the past three years.

Also, on July 16, ET and Sunoco LP (SUN) entered a joint venture to combine their crude oil and produced water-gathering assets in the Permian Basin. ET will hold a 67.5% interest in the joint venture, with Sunoco holding a 32.5% interest. ET will oversee over 5,000 miles of pipelines and 11 million barrels of storage capacity.

During the third quarter that ended September 30, 2024, ET’s revenues rose marginally year-over-year to $20.77 billion. The company’s net income amounted to $1.43 billion and $0.32 per common unit, up 37% and 113.3% from the prior year’s quarter, respectively.

Also, the company’s adjusted EBITDA increased 11.8% year-over-year to $3.96 billion. Its distributable cash flow rose by 4.7% from the prior year to $2.63 billion.

Analysts expect ET’s revenue and EPS for the fourth quarter (ending December 2024) to grow 16.9% and 1.6% year-over-year to $23.99 billion and $0.38, respectively. For the fiscal year 2024, the company’s revenue and EPS are expected to grow 3.1% and 33.5% year-over-year to $81.04 billion and $1.46.

Shares of ET have surged 13.3% over the past six months and 34.8% over the past year to close the last trading session at $18.28.

ET’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has an A grade for Momentum and a B grade for Value, Sentiment, and Stability. In the Energy - Oil & Gas industry, ET is ranked #4 on 77 stocks.

Click here to access additional ratings of ET for Growth and Quality.

What To Do Next?

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ET shares were trading at $18.40 per share on Thursday morning, up $0.12 (+0.66%). Year-to-date, ET has gained 44.52%, versus a 25.27% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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