Extended oil production cuts and the simultaneous dwindling of crude oil inventories have sent oil prices soaring to heights. To potentially profit, one could invest in robust energy stocks PBF Energy Inc. (PBF), Energy Transfer LP (ET), and Shell plc (SHEL) this week. Let’s understand this in detail.

Recently, Saudi Arabia opted to prolong its voluntary reduction of crude oil production by 1 million barrels per day until the year's end. Concurrently, Russia, the world's second-largest oil exporter, extended its voluntary reduction of 300,000 barrels per day in oil exports until year-end, intending to preserve market stability.

Given the reductions implemented by Saudi Arabia and OPEC+ and the declining commercial crude inventories in the United States, oil prices have recently surged to their highest levels in months. The global benchmark, Brent Crude, surged and reached a fresh peak for 2023 last month, surpassing the $97 per barrel mark.

The Energy Information Administration's report of a notable 2.2 million barrel reduction in crude oil inventories for the week ending September 22 drove this development, contrasting with the previous week's 2.1 million barrel decline and the prior week's 4 million barrel increase.

In light of these encouraging trends, let's look at the fundamentals of the three best Energy - Oil & Gas stocks, beginning with number 3.

Stock #3: PBF Energy Inc. (PBF)

PBF manufactures gasoline, ultra-low-sulfur diesel, heating oil, jet fuel, and petrochemicals. It also produces transportation fuels, petrochemical feedstocks, blending components, and other petroleum products from crude oil. The company's segments include Refining and Logistics.

On June 28, PBF and Eni Sustainable Mobility Spa finalized a 50-50 joint venture collaboration within St. Bernard Renewables LLC (SBR), an operational biorefinery situated alongside PBF's Chalmette Refinery in Louisiana.

The alliance underscores PBF's dedication to supplying an array of energy sources to its clientele while diminishing its product portfolio's carbon footprint. Also, the SBR biorefinery anticipates significant advantages from the combined strengths and expertise of PBF and Eni, further enhancing its potential in the renewable energy sector.

During the second quarter that ended June 30, 2023, PBF’s revenues stood at $9.16 billion. Moreover, the net income attributable to PBF stockholders and net income available to Class A common stock per share came in at $1.02 billion and $7.88, respectively.

In addition, as of June 30, 2023, the company’s total assets amounted to $14.03 billion, compared to $13.55 billion as of December 31, 2022.

PBF’s shares have gained 43.1% over the past year to close the last trading session at $52.25.

PBF’s positive fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.

PBF has an A grade for Value and a B for Momentum and Quality. It is ranked #14 in the 89-stock Energy - Oil & Gas industry.

In addition to the POWR Ratings I’ve just highlighted, you can see PBF’s ratings for Growth, Sentiment, and Stability here.

Stock #2: Energy Transfer LP (ET)

ET manages a comprehensive network of natural gas assets, including gathering, NGL pipelines, processing plants, and treatment facilities. Its infrastructure spans 11,600 miles of gas transportation pipelines, three storage sites in Texas, two in Texas and Oklahoma, and an extensive 19,945 miles of interstate gas pipelines.

On August 16, ET and Crestwood Equity Partners LP (CEQP) unveiled a definitive merger agreement whereby ET would acquire CEQP in an all-equity deal valued at roughly $7.1 billion.

The transaction would solidify ET's presence in the value chain, extending into CEQP’s Williston and Delaware basins while also marking its entry into the Powder River basin. Moreover, it anticipates significant advantages for ET’s NGL & Refined Products and Crude Oil businesses.

On March 27, ET and Lotus Midstream LLC announced their definitive agreement, where ET will acquire Lotus Midstream for approximately $1.45 billion from an EnCap Flatrock Midstream (EFM) affiliate. The acquisition amplifies ET's presence in the Permian Basin through the addition of Lotus Midstream's Centurion Pipeline assets.

For the second quarter that ended June 30, 2023, ET’s interstate transportation and storage segment’s adjusted EBITDA increased 11.1% year-over-year to $441 million. The NGL and refined products transportation and services segment’s adjusted EBITDA grew 9.7% from the year-ago value to $837 million.

In addition, adjusted EBITDA from the crude oil transportation and services segment rose 19.9% from the prior year’s period to $674 million.

Analysts expect ET’s revenue to grow 7.5% year-over-year to $85.13 billion for the fiscal year ending December 2024. Likewise, the company’s EPS for the next year is estimated to come in at $1.46, up 9.8% from the prior year. The stock has gained 21.5% over the past year, closing the last trading session at $13.78.

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

ET has a B grade for Value and Momentum. It is ranked #13 out of 89 stocks within the Energy - Oil & Gas industry.

Click here to access the additional ET ratings (Growth, Stability, Sentiment, and Quality). 

Stock #1: Shell plc (SHEL)

Based in London, the United Kingdom, SHEL explores and extracts crude oil, natural gas, and natural gas liquids. It also handles oil and gas marketing and transportation, produces gas-to-liquid fuels and related products, and manages the essential upstream and midstream infrastructure required for gas delivery to the market.

On August 28, Sarawak Shell Berhad (SSB), a subsidiary of SHEL, initiated gas production at the Timi platform in Malaysia under the SK318 production sharing contract (PSC). Timi stands out for using a solar and wind hybrid power system, marking SHEL's eco-friendly approach in Malaysia.

Timi is designed to yield up to 50,000 barrels of oil equivalent per day of gas at its peak production. It will transport this gas through an 80-kilometer pipeline to the F23 production hub, supporting future growth in Sarawak's central Luconia area. SHEL could benefit from reduced emissions and enhanced operational efficiency.

On April 18, Shell U.K. Ltd., a subsidiary of SHEL, successfully resumed operations at the Pierce field in the UK Central North Sea. This follows a substantial upgrade to enable gas production after years of oil-only production. Pierce is jointly operated by SHEL (92.52%) and Ithaca Energy (UK) Limited (7.48%). Such developments should bode well for the company’s growth and expansion.

For the second quarter that ended June 30, 2023, SHEL’s Marketing segment’s adjusted EBITDA grew 10.5% year-over-year to $1.60 billion. The segment’s cash flow from operating activities stood at $1.41 billion, compared to an outflow of $454 million in the prior year’s period.

Also, the company’s Renewables and Energy Solution segment’s cash inflow from operating activities came in at $3.19 billion, compared to an outflow of $558 million in the previous year’s quarter. As of June 30, 2023, the company’s cash and cash equivalents stood at $45.09 billion, compared to $40.25 billion as of December 31, 2022.

The company’s revenue for the fiscal year ending December 2024 is expected to increase 2.8% year-over-year to $349.82 billion. Similarly, analysts expect SHEL’s EPS for the next year to come in at $8.49, up 1.4% from the previous year. Furthermore, the company surpassed the consensus revenue and EPS estimates in three of the four trailing quarters.

Over the past year, SHEL has gained 21.1%, closing the last trading session at $63.36.

SHEL’s robust outlook is apparent in its POWR Ratings. The stock has an overall rating of B, which translates to Buy in our proprietary rating system.

SHEL has an A grade for Momentum and a B for Stability and Quality. It has ranked #7 out of 89 stocks within the same industry.

Click here to access additional SHEL ratings for Growth, Value, and Sentiment.

What To Do Next?

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SHEL shares were trading at $63.17 per share on Tuesday afternoon, down $0.19 (-0.30%). Year-to-date, SHEL has gained 14.23%, versus a 11.65% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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