ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Energy Infrastructure Channel
  2. Energy Stocks: Noisy Trading Drowns Out Fundamentals
Energy Infrastructure Channel
Share

Energy Stocks: Noisy Trading Drowns Out Fundamentals

Stacey Morris, CFAJul 12, 2022
2022-07-12

Recession fears have weighed on the energy sector over the last month, and oil prices briefly dipping below $100 per barrel (bbl) last week further pressured energy stocks. Despite volatile trading, the fundamentals for many energy companies have not changed as much as the sell-off would suggest, and earnings estimates have largely moved higher over the last month.

Earnings results for 2Q22 should be extremely strong for energy companies broadly given the macro backdrop during the quarter and high commodity prices. Severe weather in the Mid-Continent may have a negative impact on some operators, but there are not likely to be many flies in the ointment this quarter. The chart below shows some of the largest names in each energy subsector and compares performance over the last month with 2022 EBITDA estimate revisions. Consensus forecasts have generally moved higher, particularly for refiners, but equity values are off by double-digit percentages. Admittedly, sell-side analysts will probably update numbers this week, but estimates will likely be increasing.

Table 1-2 Graph Chart Image

Aside from earnings expectations, the outlook for measured US production growth remains intact. Oil’s move from ~$120/bbl a month ago to $96/bbl at the intra-day low last week has not altered producer plans. Similarly, natural gas prices fell from $9.32 per Million British thermal unit (MMBtu) on June 6 to $6.30/MMBtu on July 7 largely due to an extended outage at Freeport LNG but remain very attractive when viewed in the context of recent history. Exploration and production companies (E&Ps) are generating strong cash flows at these prices, which will be evident as companies report 2Q22 results. The same signal to grow production is in place at $96/bbl or $120/bbl, and the Baker Hughes US rig count is up 19 rigs from June 10 to July 8. That said, most public producers are only growing modestly in any event given firm commitments to capital discipline.

Recession fears have pressured the energy space, but fundamentals have not changed nearly as much as recent weakness would suggest. A recession could certainly weigh on energy stocks as lower oil demand tends to result in lower oil prices (read more), but for investors anticipating a soft landing, the recent weakness could be an opportunity. Earnings season may help shift the momentum as companies report solid results and showcase investor-friendly initiatives, namely buybacks and generous dividend policies supported by strong free cash flow generation.

For more news, information, and strategy, visit the Energy Infrastructure Channel.


Content continues below advertisement

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X