The top-performing oil and gas stocks in the past year include TORM PLC, Teekay Tankers, and Scorpio Tankers. Despite oil prices dropping significantly from their peaks recorded nearly a year ago, these companies have seen their shares rise by well over 100% in the past year, handily beating the 9% drop in the Russell 1000 Index.
Oil and gas stocks as a group, measured by the benchmark Energy Select Sector SPDR ETF (XLE), have climbed by 10% in the past year, outperforming the broader market. However, declining oil and gas prices in the second half of 2022 and into 2023 could pressure margins and revenues in the sector.
Below, we examine the top oil and gas stocks in three categories: best value, fastest growth, and most momentum, respectively. All data are as of April 6.
Best Value Oil and Gas Stocks
These are the oil and gas stocks with the lowest 12-month trailing price-to-earnings (P/E) ratio. A low P/E ratio shows that you're paying less for each dollar of profit generated. Profit can be returned to shareholders in the form of dividends and share buybacks.
|Best Value Oil and Gas Stocks|
|Price ($)||Market Capitalization ($B)||12-Month Trailing P/E Ratio|
|Obsidian Energy Ltd. (OBE)||6.90||0.6||1.0|
|Vital Energy (VTLE)||50.25||0.9||1.3|
|SilverBow Resources Inc. (SBOW)||24.13||0.5||1.6|
- Obsidian Energy Ltd.: Obsidian Energy explores, develops, and produces petroleum resources around Alberta, Canada. On Feb. 23, the company released its fourth-quarter full-year earnings. Net income surged 29-fold, with production revenue growing by 38% compared to Q4 2021. The massive increase in net income was due to strong funds from operations (FFO) and higher reserve and commodities value.
- Vital Energy: Vital Energy is an oil and natural gas exploration and development company focused on the Permian Basin in West Texas. Formerly known as Laredo Petroleum, Inc., the company changed its name to Vital Energy in January 2023. Net income for the company fell by 45% in the fourth quarter of 2022 on weaker sales volume and lower average natural gas prices.
- SilverBow Resources Inc.: SilverBow Resources is an oil and gas company that engages in the production of petroleum products in southern Texas.
Fastest-Growing Oil and Gas Stocks
These are the top oil and gas stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and their 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 law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.
|Fastest-Growing Oil and Gas Stocks|
|Price ($)||Market Cap ($B)||EPS Growth (%)||Revenue Growth (%)|
|Frontline PLC (FRO)||15.44||3.4||980||148|
|Permian Basin Royalty Trust (PBT)||26.86||1.3||371||354|
|Par Pacific Holdings Inc. (PARR)||28.38||1.7||900||40|
- Frontline PLC: Frontline, located in Bermuda, is a crude oil transport company with a fleet of 70 ships. Net income in the fourth quarter of 2022 soared 12-fold to $240 million—the most since 2008—due to a steep increase in demand in China and larger crude carriers being utilized.
- Permian Basin Royalty Trust.: Permian Basin is a trust that owns interests in Texas properties producing oil and natural gas liquids (NGLs). The trustee of Permian Basin Royalty is Simmons Bank. The trust announced a March 2023 monthly cash distribution of around 2.4 cents per unit, which was down compared to the previous month due to an increase in oil and gas production.
- Par Pacific Holdings Inc.: Par Pacific owns and operates energy infrastructure and retail businesses. The company manages multiple oil refineries in Hawaii and the Pacific Northwest and logistics operation fuel transportation and storage among the Hawaiian Islands. Par Pacific also owns a convenience store chain in Hawaii called Hele.
Oil and Gas Stocks With the Most Momentum
These are the oil and gas stocks that had the highest total return over the past 12 months. Companies with total returns over 1,000% were excluded as outliers.
|Oil and Gas Stocks With the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|TORM PLC (TRMD)||29.45||2.4||284|
|Teekay Tankers Ltd. (TNK)||40.22||1.4||182|
|Scorpio Tankers Inc. (STNG)||55.50||3.3||168|
|Russell 1000 Index||N/A||N/A||-9|
|Energy Select Sector SPDR ETF (XLE)||N/A||N/A||10|
- TORM PLC: TORM, located in the U.K., is a pure-play tanker company that transports petroleum products worldwide.
- Teekay Tankers Ltd.: Teekay Tankers is a marine transportation and logistics company located in Bermuda with a fleet of 50 tankers. Revenue in the fourth quarter of 2022 doubled from the year before, owing to historically high tanker rates. Net income was $146 million compared with a $40 million loss the year before.
- Scorpio Tankers Inc.: Scorpio Tankers is a Monaco-based shipping company that transports petroleum products. It currently owns or leases 113 tankers.
Advantages of Oil and Gas Stocks
Inflation/Interest Rates Hedge: Historically, rising inflation has been correlated with higher oil prices, offering investors a potential portfolio hedge by investing in oil and gas stocks. Typically, the Federal Reserve raises interest rates to tackle inflation, aiming to lower consumer demand. According to Bob Iaccino, co-founder of Path Trading Partners, the price of West Texas Intermediate (WTI) crude contracts over the past six rate-tightening cycles has risen by an average of 16.06% six months after each rate hike.
Tax Advantages: Investing in oil and gas stocks provides investors and producers with a range of unique tax benefits. Some key advantages include the favorable way active and passive income is treated and the deduction of certain drilling and lease costs. For instance, the Internal Revenue Service (IRS) tax code considers earnings from oil and gas royalties as passive income while categorizing net losses as active income. This may enable some investors to offset their production revenue losses from other forms of income, such as capital gains.
Risks of Oil and Gas Stocks
Tightening Government Regulations: Oil and gas stocks face increasing challenges from environmental regulations as governments set targets on lowering carbon emissions and continue to encourage the transition from fossil fuels to renewable energy sources. Stocks in the sector already have high capital expenditure (CapEx); therefore, adding additional costs to meet climate goals eats into cash reserves, especially if energy prices start to fall.
Price Volatility: Oil and gas stocks are prone to significant commodity price volatility, driven by supply and demand fundamentals and geopolitical events. For example, a surprise decision to increase production by the Organization of the Petroleum Exporting Countries (OPEC) members can cause a sharp drop in oil prices. Conversely, war breaking out can lead to a surge in energy prices. For instance, due to Russia's position as the world's largest gas exporter, natural gas gained around 75% in the first half of 2022 following Russia's invasion of Ukraine.
Yahoo! Finance. "Crude Oil May 23 (CL=F)."
YCharts. “Financial Data.”
Obsidian Energy Ltd. "Obsidian Energy Announces Fourth-Quarter and Full-Year 2022 Results.
Vital Energy. "Vital Energy Announces Fourth-Quarter 2022 Financial and Operating Results."
Frontline PLC "FRO Fourth-Quarter and Full-Year 2022 Results."
Permian Basin Royalty Trust. "Permian Basin Royalty Trust Announces March Cash Distribution."
Teekay Tankers Ltd. "Teekay Tankers Ltd. Reports Fourth-Quarter and Annual 2022 Results."
Investing News Network. "Oil Prices and Inflation: What's the Correlation?"
DW Energy Group. "Tax Advantages of Oil and Gas Investing."
Yahoo! Finance. "Natural Gas May 23 (NG=F)."