Top Energy Stocks for September 2022

APA, CTRA, and AR are top for value, growth, and momentum, respectively

The energy sector is composed of companies focused on the exploration, production, and marketing of oil, gas, and renewable resources around the world. Energy sector stocks include upstream companies that primarily engage in the exploration of oil or gas reserves, such as Devon Energy Corp. (DVN). Downstream companies include Marathon Petroleum Corp. (MPC), which refines and processes oil and gas products for delivery to consumers. Among the industry's biggest players are Chevron Corp. (CVX) and ExxonMobil Corp (XOM).

Oil and gas prices spiked earlier in the year due to Russia's invasion of Ukraine. President Biden called on oil companies in June to refine more oil into gasoline in an effort to bring down gas prices nationwide. Oil and gas prices could spike again into 2023 due to a predicted energy crisis in Europe this winter, reserve concerns, and other factors.

Energy stocks, as represented by an exchange-traded fund (ETF)—the Energy Select Sector SPDR ETF (XLE)—have dramatically outperformed the broader market, posting a total return of 79.9% over the past six months compared to the Russell 1000 Index's total return of -8.2%. These market performance numbers and all statistics in the tables below are as of Aug. 24, 2022.

Below are the top three energy stocks with the best value, the fastest growth, and the most momentum.

Best Value Energy Stocks

These are the energy stocks with the lowest 12-month trailing price-to-earnings (P/E) ratios. Because profits can be returned to shareholders in the form of dividends and buybacks, a low P/E ratio shows that you're paying less for each dollar of profit generated.

Best Value Energy Stocks
  Price ($) Market Capitalization (Market Cap) ($B) 12-Month Trailing P/E Ratio
APA Corp. (APA) 40.31 13.2 4.5
PDC Energy Inc. (PDCE) 67.80 6.5 5.4
Ovintiv Inc. (OVV) 53.67 13.7 5.8

Source: YCharts

  • APA Corp.: APA is an oil and gas exploration and production company. It has operations in the U.S., Egypt's Western Desert, and the U.K.'s North Sea. It also has exploration opportunities offshore of Suriname. On Aug. 3, APA announced earnings results for Q2 2022. Net income attributable to common stock nearly tripled year over year (YOY) on total revenue growth of 73.5%. APA saw growth across oil, natural gas, and natural gas liquids (NGLs) revenue.
  • PDC Energy Inc.: PDC Energy is an oil, natural gas, and NGLs exploration and production company. Its primary operations are in Colorado and west Texas. On Aug. 25, PDC announced a quarterly cash dividend of $0.35 per common share. The dividend is payable on Sept. 22 to shareholders of record as of Sept. 8, 2022.
  • Ovintiv Inc.: Ovintiv is an oil and natural gas exploration and production company. It has operations at multiple basins in the U.S. and Canada. The company also markets its products to third-party customers through its Market Optimization business.

Fastest Growing Energy Stocks

These are the top energy stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly YOY percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth. Both sales and earnings are critical factors in the success of a company.

Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax laws or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 2,500% were excluded as outliers.

Fastest Growing Energy Stocks
  Price ($) Market Cap ($B) EPS Growth (%) Revenue Growth (%)
Coterra Energy Inc. (CTRA) 31.27 24.9 1,800 693.8
Targa Resources Corp. (TRGP) 71.26 16.1 973.3 77.3
Phillips 66 (PSX) 92.37 44.4 889.4 79.9

Source: YCharts

  • Coterra Energy Inc.: Coterra Energy is an independent oil and gas exploration and production company with operations focused on the Permian Basin, the Marcellus Shale, and the Anadarko Basin. Coterra reported Q2 2022 earnings results on Aug. 2. Net income skyrocketed about 41-fold as revenue climbed by about seven times YOY. The company highlighted capital efficiency and operational execution as factors contributing to growth, offset by inflationary pressures.
  • Targa Resources Corp.: Targa Resources is a midstream services provider. It owns and operates domestic midstream infrastructure assets to connect natural gas and NGLs to domestic and international markets.
  • Phillips 66: Phillips 66 is a diversified energy company. It has operations in Midstream, Chemicals, Refining, and Marketing and Specialties areas. The company announced on Aug. 17 that it had submitted a non-binding proposal to acquire all publicly held common shares of DCP Midstream LP (DCP). Phillips 66 has proposed consideration of $34.75 per share.

Energy Stocks With the Most Momentum

These are the energy stocks that had the highest total return over the past 12 months.

Energy Stocks With the Most Momentum
Price ($) Market Cap ($B) 12-Month Trailing Total Return (%)
Antero Resources Corp. (AR) 43.09 13.2 247.8
Occidental Petroleum Corp. (OXY) 74.91 69.8 208.8
EQT Corp. (EQT) 49.69 18.4 203.3
Russell 1000 N/A N/A -8.2
Energy Select Sector SPDR ETF (XLE) N/A N/A 79.9

Source: YCharts

  • Antero Resources Corp.: Antero Resources is an oil and natural gas company focused on further exploring properties in the Appalachian Basin. In 2018, Antero resources became the largest American producer of NGLs. The company's operating area mainly consists of the Utica Shale and the Marcellus Shale.
  • Occidental Petroleum Corp.: Occidental Petroleum is an oil and gas exploration and production company. The company explores for and produces oil, NGLs, and natural gas. It also transports and stores oil and natural gas and manufactures basic chemicals and vinyls. On Aug. 25, Occidental and its subsidiary 1PointFive announced plans to begin engineering and construction on a Direct Air Capture plant in Ector County, Texas. Construction will begin in Q3 2022, and start-up is expected in late 2024. The project is expected to be the largest of its kind worldwide.
  • EQT Corp.: EQT Corp. is a natural gas production company with operations in Pennsylvania, West Virginia, and Ohio. It is the largest producer of natural gas in the U.S. On July 20, EQT announced a quarterly cash dividend of $0.15 per share. The dividend is payable on Sept. 1 to shareholders as of Aug. 9, 2022.

What the Supreme Court's EPA Ruling Means for Energy Stocks

In June 2022, the U.S. Supreme Court ruled to restrict Environmental Protection Agency's (EPA)ability to limit carbon emission outputs from power plants. Instead, the EPA must now gain congressional approval before enacting sweeping climate change regulations. The decision targeted the Obama administration's Clean Power Plan (CPP), which had called for energy players to curb emissions by 32% from 2005 levels by 2030. Under the CPP, the EPA had the authority to remake the U.S. power system, shifting from fossil fuels to cleaner energy alternatives.

The ruling removes potential EPA regulatory challenges for coal, oil, and gas stocks that have already performed strongly in 2022 amid surging energy demand in the wake of the pandemic. However, the decision may present headwinds for renewable energy stocks, many of which have struggled to gain traction despite clean energy being an integral part of President Joe Biden's policy agenda.

It remains unclear how much long-term upside the ruling will deliver fossil fuel producers given the clear move to renewable clean energy. Moreover, many utilities have already implemented EPA environmental regulations, especially where it has made economic sense.

Advantages of Investing in Energy Stocks

Two key reasons to invest in the energy sector include the size of the market and the group's recent returns.

Size of the Market: Given that the world relies on energy to power everything from cars to factories and just about everything in between, it's not surprising that the value of the global energy market stands at around $7 trillion. Furthermore, the International Energy Agency (IEA) expects global energy demand to grow by more than 30% by 2035. The energy market also has many industries to invest in, including exploitation, storage, renewables, production, transportation, and distribution.

Recent Returns: The trend is your friend, as they say on Wall Street. No sector epitomizes this saying more than energy stocks over the past year. The group leads every other area of the market by performance, having returned 53.83% over the past 12 months.

The comments, opinions, and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described in our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.

Article Sources
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  9. Phillips 66. "Phillips 66 Announces Offer to Acquire Outstanding Publicly Held Common Units of DCP Midstream, LP."

  10. Occidental Petroleum Corp. "Occidental, 1PointFive to Begin Construction of World's Largest Direct Air Capture Plant in the Texas Permian Basin."

  11. EQT Corp. "EQT Announces 20 Percent Increase to Quarterly Cash Dividend."

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