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Yahoo
30-05-2025
- Business
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4 Refining & Marketing Stocks to Watch as Margins Stay Tight
The Zacks Oil and Gas - Refining & Marketing industry is standing at a crossroads. On paper, things look solid—refined product inventories are tight, demand for gasoline and diesel is up, and long-term fundamentals remain constructive. Yet, refining margins tell a different story. Despite favorable supply-demand dynamics, market sentiment remains shaky. Concerns around economic slowdown and regulatory uncertainty, particularly in renewable diesel, have weighed on valuations and earnings expectations. Still, not all is gloom. U.S. refiners enjoy structural advantages like domestic crude access and low-cost inputs. And four names — Marathon Petroleum MPC, Phillips 66 PSX, Valero Energy VLO and Galp Energia GLPEY — stand out with strong assets, smart capital allocation, and long-term positioning that could reward patient investors. Industry Overview The Zacks Oil and Gas - Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies also operate refined product terminals, storage facilities and transportation services. The primary activity of these firms involves buying crude/other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refiners are also prone to unplanned outages. 3 Trends Defining the Oil and Gas - Refining & Marketing Industry's Future Margin Compression Despite Healthy Fundamentals: Despite low inventories and solid demand trends, refining margins have lagged expectations. Fundamentals appear strong — diesel and gasoline demand are up year over year, and inventory levels are tight — yet refining margins have remained muted. This disconnect may reflect broader macroeconomic concerns, such as the risk of a slowdown or recession, which is weighing on investor sentiment. Refiners are operating in a cautious environment where markets are pricing in pessimism, even as supply-demand dynamics suggest tighter Market and Policy Uncertainty Weigh on Renewable Diesel: The shift from the Blenders' Tax Credit (BTC) to the Production Tax Credit (PTC) has made renewable diesel less profitable. Many producers are seeing lower returns due to feedstock qualification issues and unclear policy direction — especially with possible changes to California's Low Carbon Fuel Standard (LCFS) rules. As a result, output is being cut, and a recovery will likely depend on a strong rebound in renewable fuel credits or clearer regulatory support, both of which are uncertain right Support Long-Term Refining Outlook: The refining industry appears well-positioned for an improved mid-cycle environment, supported by long-term fundamentals and structural advantages in the U.S. market. Marathon Petroleum expects global demand growth for refined products to persist, even as some 800,000 barrels per day of capacity is set to come offline across the U.S. and Europe. In parallel, U.S. refined product inventories remain below five-year averages, setting a favorable tone for margin expansion. Add to this the U.S. refining sector's locational advantage—easy access to domestic crude, low-cost natural gas and butane, and a flexible asset base—and it paints an encouraging picture for U.S. refiners. Zacks Industry Rank Indicates Bearish Outlook The Zacks Oil and Gas - Refining & Marketing is a 13-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #139, which places it in the bottom 43% of 245 Zacks group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group's earnings growth potential. As a matter of fact, while the industry's earnings estimate for 2025 has gone down 38.3% in the past year, the same for 2026 has fallen 19.7% over the same the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it's worth taking a look at the industry's shareholder returns and current valuation first. Industry Underperforms Sector & S&P 500 The Zacks Oil and Gas - Refining & Marketing industry has fared worse than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past industry has gone down 16.9% over this period compared with the broader sector's decrease of 8.2%. Meanwhile, the S&P 500 has gained 12.5%. Industry's Current Valuation Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA), the industry is currently trading at 3.76X, significantly lower than the S&P 500's 16.65X. It is also below the sector's trailing 12-month EV/EBITDA of the past five years, the industry has traded as high as 6.95X and as low as 1.79X, with a median of 3.60X, as the chart below shows. 4 Stocks in Focus Marathon Petroleum: It is a leading independent refiner, transporter and marketer of petroleum products. Marathon Petroleum's access to lower-cost crude in the Permian, Bakken, and Canada helps it benefit from the differentials. The Zacks Rank #3 (Hold) company's exceptional cash flow generation and aggressive shareholder returns are the key drivers for stock price appreciation. You can see the complete list of today's Zacks #1 Rank stocks here. Findlay, OH-based Marathon Petroleum has a market capitalization of $48.7 billion. MPC beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Shares of MPC have lost 9% in a year. Phillips 66: Based in Houston, TX, Phillips 66 is a diversified and integrated energy company established following the 2012 spin-off of ConocoPhillips' downstream operations. As one of the world's leading refiners, Phillips 66 operates 13 refineries, primarily in the United States, with a total refining capacity of 2.2 million barrels per 66 beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 10.6%. Shares of this Zacks Rank #3 company have lost 19% in a year. Valero Energy: San Antonio, TX-based Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. The company has a refining capacity of 3.2 million barrels per day across 15 refineries located throughout the United States, Canada and the United Energy beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 122.9%. Shares of this Zacks Rank #3 company have lost 18% in a year. Galp Energia: It is a Portuguese integrated energy firm with a significant presence in the downstream segment. The company's Refining and Marketing unit is responsible for the supply and trade of oil and biofuels, and the operation of oil and gas refineries. It operates two refineries in based in Lisbon, has a four-quarter average earnings surprise of 56.8%. The firm has a market capitalization of $11.3 billion. This #3 Ranked company's shares have decreased 25% in a year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report Valero Energy Corporation (VLO) : Free Stock Analysis Report Phillips 66 (PSX) : Free Stock Analysis Report Galp Energia SGPS SA (GLPEY) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
28-05-2025
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Zacks Industry Outlook Highlights Natural Gas Services, Solaris Energy and Oil States International
Chicago, IL – May 28, 2025 – Today, Zacks Equity Research discusses Natural Gas Services Group, Inc. NGS, Solaris Energy Infrastructure, Inc. SEI and Oil States International, Inc. OIS. Industry: Oil & Gas Equipment Link: Rising oil production that may surpass the yearly demand growth of the commodity will probably drag down prices. This will hurt demand for drilling and production equipment as explorers and producers will be reluctant to produce more of the commodity, creating a challenging outlook for the Zacks Oil and Gas- Mechanical and Equipment industry. Companies striving to navigate these industry challenges include Natural Gas Services Group, Inc., Solaris Energy Infrastructure, Inc. and Oil States International, Inc. The Zacks Oil and Gas - Mechanical and Equipment industry comprises companies that provide necessary oilfield equipment — production machinery, pumps, valves and several other drilling appliances like rig components — to exploration and production companies. These help upstream energy players extract crude oil and natural gas from fields, both onshore and offshore. Hence, the well-being of oilfield equipment businesses is positively correlated to expenditures by upstream companies. These companies receive deals from integrated energy firms and independent as well as national oil and gas companies. Oilfield equipment providers also design, manufacture, engineer and install products used to treat and process crude oil, natural gas and others. Their products comprise gadgets and instruments for gas compression packages and water treatment works. : The U.S. Energy Information Administration ('EIA') is expecting the West Texas Intermediate Spot Average price for 2025 and 2026 at $61.81 per barrel and $55.24 per barrel, respectively. The prices are significantly lower than the $76.60 per barrel price for 2024. EIA cited the increasing production volumes of the commodity to overcome yearly crude oil demand growth as the reason for lower oil prices. Thus, a lower pricing environment of the commodity is unlikely to provide incentives for more exploration and production activities, consequently leading to diminished demand for drilling and production equipment of companies in the industry. Exploration and production companies are becoming more conservative in their capital expenditures for upstream operations. This shift is driven by shareholders who want these companies to prioritize returning capital over increasing spending on production. This trend is likely to diminish demand for drilling and production equipment. : The composite stocks belonging to the industry have consistently been generating lower dividend yield than the oil energy sector over the past five years. Thus, investors looking for a healthy dividend yield may avoid stocks belonging to the industry. The Zacks Oil and Gas - Mechanical and Equipment is a 11-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #206, which places it in the bottom 16% of more than 250 Zacks industries. The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Before we present a few stocks that you may want to consider, let's take a look at the industry's recent stock market performance and valuation picture. The Zacks Oil and Gas - Mechanical and Equipment industry has outperformed the broader Zacks Oil - Energy sector but lagged the Zacks S&P 500 composite over the past year. The industry has declined 3.9% in the past year compared with the broader sector's fall of 4.6% and the S&P 500's 10.8% increase. Since oilfield equipment providers are debt-laden, valuing them based on the EV/EBITDA (Enterprise Value/Earnings before Interest Tax Depreciation and Amortization) ratio makes sense. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of non-cash expenses. On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 5.66X, lower than the S&P 500's 16.39X. However, it is higher than the sector's trailing 12-month EV/EBITDA of 4.59X. Over the past five years, the industry has traded as high as 43.82X and as low as 1.11X, with a median of 10.37X. Natural Gas Services: The United States is sending more natural gas overseas as Liquefied Natural Gas (LNG). To do this, gas needs to travel through pipelines to coastal export terminals. This creates higher demand for Natural Gas Services' compression equipment to push the gas through the pipelines. So, as more LNG is exported and more pipelines are built, companies like NGS, sporting a Zacks Rank #1 (Strong Buy), benefit by renting out more of their compression machines. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. Solaris Energy: Despite a dip in oil prices, Solaris Energy, carrying a Zacks Rank #3 (Hold), hasn't experienced any major decline in business. It anticipates stable activity through the early part of the second quarter, with its logistics systems, key to supporting drilling and fracking, still in strong demand. In the first quarter, system activity rose more than 25%, and its top-fill systems were nearly fully deployed. While some operators may reduce activity later in the year if oil prices remain soft, SEI's oil and gas logistics business has proven resilient, contributing to more stable and predictable income. Oil States International: Oil States International, carrying a Zacks Rank 3, is getting a lot of new business from customers outside the United States, especially from companies working in deep ocean areas to extract oil and gas. In fact, it received more orders than it delivered this past quarter, 1.5 times more, which is a great sign. That means more activities and cash flow are lined up for the future. Since 2000, our top stock-picking strategies have blown away the S&P's +7.7% average gain per year. Amazingly, they soared with average gains of +48.4%, +50.2% and +56.7% per year. Today you can access their live picks without cost or obligation. See Stocks Free >> Media Contact Zacks Investment Research 800-767-3771 ext. 9339 support@ Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit for information about the performance numbers displayed in this press release. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Oil States International, Inc. (OIS) : Free Stock Analysis Report Natural Gas Services Group, Inc. (NGS) : Free Stock Analysis Report Solaris Energy Infrastructure, Inc. (SEI) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
22-05-2025
- Business
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3 Oil & Gas Pipeline MLP Stocks to Gain Despite Industry Gloom
Although the midstream energy sector is less vulnerable to oil and gas prices, the outlook for the Zacks Oil and Gas - Pipeline MLP industry remains uncertain. Conservatism in capital expenditures by upstream companies could lower the utilization of midstream assets. Additionally, a significant debt burden continues to hinder the ability of midstream energy companies to fund new projects and weather economic the challenges, pipeline players are in a stronger position than upstream and downstream firms, as they benefit from steady, fee-based income through long-term contracts with shippers. Leading companies in the sector include Enterprise Products Partners LP EPD, Energy Transfer LP ET and Plains All American Pipeline LP PAA. About the Industry The Zacks Oil and Gas - Pipeline MLP industry comprises master limited partnerships (or MLPs) that primarily transport oil, natural gas, refined petroleum products and natural gas liquids (NGL) to consumers in North America. Apart from transporting the commodities, the partnerships have huge capacities to store oil, natural gas and petrochemical products. The partnerships thus provide midstream services to producers and consumers of the commodities. The firms generate stable fee-based revenues from all these transportation and storage assets. The services provided by the MLPs entail the gathering and processing of commodities. The integrated midstream energy players also generate cashflows from ownership interests in fractionators and condensate distillation facilities. What's Shaping the Future of Oil & Gas - Production & Pipelines Industry? The industry is inherently capital-intensive, as evident in the debt-to-capitalization ratio of 55%, where borrowing is a common practice to finance large infrastructure projects. However, elevated leverage can constrain financial flexibility, hindering midstream energy companies' capacity to invest in new developments, navigate economic downturns, or address unforeseen costs. Energy majors will increasingly face challenges in providing sustainable energy to the world while reducing greenhouse gas emissions. Thus, to address the issues of climate change, there will be a gradual shift from fossil fuel to renewable energy. This will lower the demand for the partnerships' pipeline and storage networks for oil and natural gas. Oil and gas exploration and production companies are facing heightened pressure from investors to focus on stockholders' returns rather than production. This is hindering the production growth of commodities, thereby denting the demand for pipeline and storage assets. Zacks Industry Rank Indicates Weak Prospects The Zacks Oil and Gas - Pipeline MLP industry is a six-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #162, which places it in the bottom 34% of more than 250 Zacks industries. The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. The industry's position in the bottom 50% of the Zacks-ranked industries forms an unfavorable earnings outlook for the constituent stocks in aggregate. Before we present a few stocks that you may want to consider, let's look at the industry's recent stock market performance and its valuation picture. Industry Outperforms Sector & S&P 500 The Zacks Oil and Gas - Pipeline MLP industry has outperformed the broader Zacks Oil - Energy sector and the Zacks S&P 500 Composite over the past year. The industry has rallied 17.5% in the past year against a decline of 4.1% of the broader sector and an improvement of 12.4% of the S&P 500. One-Year Price Performance Industry's Current Valuation Since midstream-focused oil and gas partnerships use fixed-rate debt for the majority of their borrowings, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive stocks, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses. On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 11.47X, lower than the S&P 500's 16.51X. It is, however, significantly above the sector's trailing 12-month EV/EBITDA of 4.56X. Over the past five years, the industry has traded as high as 12.88X and as low as 7.48X, with a median of 9.95X. Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio 3 Oil & Gas Pipeline MLPs to Gain Enterprise Products, a top-tier North American midstream service provider, boasts a vast and diversified asset portfolio. This includes more than 50,000 miles of pipelines and a storage capacity of 300 million barrels. These assets are utilized by shippers on long-term contracts to transport and store natural gas liquids, crude oil, refined products and petrochemicals. The partnership, carrying a Zacks Rank #3 (Hold), also has 14 billion cubic feet of natural gas storage capacity, securing stable fee-based revenues. Additionally, EPD is set to generate additional fee-based earnings with $7.6 billion worth of major capital projects either currently in service or under construction. These project backlogs will not only ensure stable cashflows but will also generate handsome unitholder returns. Price and Consensus: EPD Energy Transfer has a stable business model with its huge pipeline network of natural gas, oil and refined petroleum products across 125,000 miles. The partnership has midstream assets in all the key basins in the United States, generating stable fee-based revenues. Energy Transfer, carrying a Zacks Rank #2 (Buy), has offered a higher dividend yield than the composite stocks belonging to the industry over the past year. For this year, the partnership is likely to see earnings growth of 12.5%. Price and Consensus: ET Plains All American Pipeline also enjoys stable fee-based revenues, banking on its oil and natural gas pipeline network and storage assets. In 2025, the #3 Ranked stock is likely to see top-line growth of 5.1%. You can see the complete list of today's Zacks #1 Rank stocks here. Price and Consensus: PAA Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Enterprise Products Partners L.P. (EPD) : Free Stock Analysis Report Plains All American Pipeline, L.P. (PAA) : Free Stock Analysis Report Energy Transfer LP (ET) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Sign in to access your portfolio
Yahoo
16-05-2025
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Pedevco Corp. (PED) Reports Break-Even Earnings for Q1
Pedevco Corp. (PED) reported break-even quarterly earnings per share versus the Zacks Consensus Estimate of $0.02. This compares to earnings of $0.01 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of -100%. A quarter ago, it was expected that this company would post earnings of $0.01 per share when it actually produced earnings of $0.13, delivering a surprise of 1,200%. Over the last four quarters, the company has surpassed consensus EPS estimates just once. Pedevco , which belongs to the Zacks Oil and Gas - Mechanical and and Equipment industry, posted revenues of $8.74 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 4.11%. This compares to year-ago revenues of $8.12 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Pedevco shares have lost about 17.8% since the beginning of the year versus the S&P 500's gain of 0.2%. While Pedevco has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Pedevco: mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and current fiscal year change in the days ahead. The current consensus EPS estimate is $0.01 on $8.67 million in revenues for the coming quarter and $0.05 on $36 million in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Oil and Gas - Mechanical and and Equipment is currently in the bottom 7% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. National Energy Services Reunited (NESR), another stock in the same industry, has yet to report results for the quarter ended March 2025. This company is expected to post quarterly earnings of $0.20 per share in its upcoming report, which represents a year-over-year change of +33.3%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. National Energy Services Reunited's revenues are expected to be $304.68 million, up 2.6% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Pedevco Corp. (PED) : Free Stock Analysis Report National Energy Services Reunited (NESR) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Yahoo
24-04-2025
- Business
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Top 3 U.S. Upstream Stocks to Consider Now Despite Headwinds
The Zacks Oil and Gas - Exploration and Production - United States industry is facing a mixed outlook. On one hand, OPEC's recent downward revision of its 2025 oil demand growth forecast — now pegged at 1.3 million barrels per day — reflects growing uncertainty tied to sluggish global consumption and escalating U.S. tariffs. These headwinds could weigh on oil prices in the near term. On the other hand, natural gas remains a bright spot. After soaring 44% in 2024, prices rose another 13% in Q1 2025, buoyed by cold weather, tight supply and robust global demand. Still, the clean energy transition looms large, threatening long-term fossil fuel demand as renewables and EVs continue to gain traction. Despite these challenges, select players remain compelling. Companies like EQT Corporation EQT, Antero Resources AR and HighPeak Energy HPK stand out for their strong asset base, strategic positioning and ability to capitalize on near-term opportunities in a changing energy landscape. About the Industry The Zacks Oil and Gas - US E&P industry consists of companies primarily based in the domestic market, focused on the exploration and production (E&P) of oil and natural gas. These firms find hydrocarbon reservoirs, drill oil and gas wells, and produce and sell these materials to be refined later into products such as gasoline, fuel oil, distillate, etc. The economics of oil and gas supply and demand are the fundamental drivers of this industry. In particular, a producer's cash flow is primarily determined by the realized commodity prices. In fact, all E&P companies' results are vulnerable to historically volatile prices in the energy markets. A change in realizations affects their returns and causes them to alter their production growth rates. The E&P operators are also exposed to exploration risks where drilling results are comparatively uncertain. 3 Key Trends to Watch in the Oil and Gas - US E&P Industry OPEC Revises Oil Demand Outlook: The latest monthly report from OPEC shows that the cartel has revised its global oil demand growth forecast for 2025 downward for the first time since December, now projecting an increase of 1.3 million barrels per day (bpd) — 150,000 bpd less than previous estimates. The revision stems largely from slower-than-expected consumption and new U.S. tariffs that have rattled trade dynamics and economic sentiment globally. As President Trump ramps up tariff measures, including a 125% levy on Chinese imports, investors are growing increasingly wary about how this might dampen energy demand, particularly in emerging Gas Fundamentals Reflect Tight Supply and Strong Demand: Natural gas prices have enjoyed a phenomenal run of late. Following a dramatic 44% annual increase in 2024, the commodity surged more than 13% in the first quarter of 2025, as a mix of cold weather, supply disruptions and global demand has kept the market strong. The United States and Europe both experienced record storage withdrawals this winter, tightening supply conditions and supporting higher price levels for the commodity that recently hit a two-year high of $ Energy Shift Poses Long-Term Risk: The global energy transition is gaining momentum, with renewables and electric vehicles (EVs) steadily positioning themselves as viable alternatives to fossil fuels. As EV adoption accelerates and technological advancements drive down clean energy costs, traditional oil demand could face a structural decline. While renewable infrastructure is still scaling and high upfront costs remain a barrier, steady policy support and innovation are narrowing the gap. If these trends continue, oil consumption could see material erosion over the next 5 to 10 years. Zacks Industry Rank Indicates Bearish Outlook The Zacks Oil and Gas - US E&P industry is a 35-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #192, which places it in the bottom 22% of 246 Zacks group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group's earnings growth potential. As a matter of fact, the industry's earnings estimates for 2025 have gone down 33.7% in the past the dull near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it's worth taking a look at the industry's shareholder returns and current valuation first. Industry Underperforms Sector & S&P 500 The Zacks Oil and Gas - US E&P industry has fared worse than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past industry has moved down 32.9% over this period compared with the broader sector's decrease of 15.8%. Meanwhile, the S&P 500 has gained 2.1%. Industry's Current Valuation Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 10.70X, significantly lower than the S&P 500's 15.58X. It is, however, well above the sector's trailing 12-month EV/EBITDA of the past five years, the industry has traded as high as 15.45X, as low as 3.56X, with a median of 5.94X. 3 Stocks to Buy HighPeak Energy: HighPeak Energy is a fast-growing independent oil and gas producer with a premier position in the heart of the Midland Basin, primarily in Howard County, Texas. With over 100,000 net contiguous acres and greater than 90% operated, the Zacks Rank #1 (Strong Buy) company benefits from exceptional scale, high oil cut, and industry-leading margins. Its strong infrastructure and efficient capital deployment support consistent operational performance and a deep inventory of drilling opportunities. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. The Zacks Consensus Estimate for the company's 2025 earnings suggests an impressive 92.5% increase. Notably, over the past 60 days, the Zacks Consensus Estimate for HighPeak Energy's 2025 earnings has jumped 45%. EQT Corporation: EQT is the largest natural gas producer in the domestic market based on average daily sales volumes. With a primary emphasis on the Appalachian Basin, spanning Ohio, Pennsylvania and West Virginia, the Zacks Rank #2 (Buy) company's share of natural gas in its overall production/sales is more than 90%.EQT's expected EPS growth rate for three to five years is currently 51.2%, which compares favorably with the industry's growth rate of 19.3%. Notably, over the past 60 days, the Zacks Consensus Estimate for EQT's 2025 earnings has moved up 11%. Antero Resources: It is one of the leading natural gas producers in the United States. Antero Resources has more than two decades of premium low-cost drilling inventory in the prolific Appalachian Basin, indicating a strong production outlook. AR churned out 316 billion cubic feet equivalent (Bcfe) in the most recent quarter, of which more than 60% was natural Zacks Consensus Estimate for Antero Resources' 2025 earnings per share indicates an astounding 1,514.3% year-over-year growth. Over the past 60 days, the Zacks Rank #2 operator has seen its 2025 EPS projection move up around 11%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report EQT Corporation (EQT) : Free Stock Analysis Report Antero Resources Corporation (AR) : Free Stock Analysis Report HighPeak Energy, Inc. (HPK) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
