By Alex Kimani
With U.S. energy companies enduring another torrid year, foreign oil stocks are looking increasingly attractive for local investors.
One of their big draws: Many non-US energy companies tend to have higher exposure to high-growth prospect drilling regions such as the Middle East, Asia Pacific and Africa than their stateside brethren–not to mention that some are generous dividend payers, too.
Some of the best buys in the sector are oil giants with market caps close to or exceeding $100 billion because they benefit from deep pockets necessary to explore underdeveloped basins as well as enjoying superior geographical diversification.
Many of these stocks are within reach of the average U.S. investor since they are also listed on American exchanges, while the rest can be traded using American Depository Receipts (ADRs).
Here are our Top 5 foreign oil stocks, mixing the obvious with the potentially better buys you might not have thought about:
#1 BP Plc (NYSE:BP, LON:BP)
Market Cap: $132.75B
P/E Ratio: 27.85
YTD Share Returns: 0.6%
Dividend Yield: 6.29%
BP Plc is British multinational oil and gas company headquartered in London in the UK. BP stock is listed both on the New York Stock Exchange and the London Stock Exchange.
Like many oil majors, BP is going through challenging times due to low energy prices. During the last quarter (Q3), the company reported revenue of $69.29B, which though $2.42B better than the Wall Street consensus, still represented a 14.2-percent Y/Y drop.
The company’s underlying replacement cost profit (a proxy for net income) declined 41 percent to $2.3B, with the company citing weak oil prices, lower upstream earnings and weather-related impacts.
The shares have come under pressure ever since the UK government ordered a total freeze on all fracking operations on grounds of public safety after a series of tremors hit the country.
On a brighter note, the company’s subsidiary, BP Midstream Partners (NYSE:BPMP), plans to significantly expand its Mars crude oil pipeline to accommodate new offshore volumes. The Mars pipeline boasts a mainline capacity of 400K bbl/day.
#2 Total S.A. (NYSE:TOT, EPA:FP)
Market Cap: $141.65B
P/E Ratio: 15.18
YTD Share Returns: 6%
Dividend Yield: 5.35%
One of the world’s seven “Supermajor” oil companies, Total S.A. is a multinational integrated oil and gas company based in France. Like its British counterpart, Total S.A. is listed on two exchanges: the New York Stock Exchange and the Paris Stock Exchange.
For its third quarter earnings, Total reported revenue of $48.6B, good for -11.2-percent Y/Y growth and $860M higher than analysts’ consensus, while GAAP EPS of $1.04 beat by $0.03.
Despite the disappointing earnings, TOT revealed that Q3 production climbed 8.4 percent Y/Y to 3.04m boe/day, with the company on track to boost output by 9 percent for the full year.
The output growth was given a boost by the start-up and ramp-up of new projects such as Ichthys in Australia, Yamal LNG in Russia, Culzean in the UK, Egina in Nigeria and Kaombo in Angola. The company, however, announced that its 230K bbl/d project in Uganda was facing delays after running into trouble with the Ugandan authorities.
#3 Petroleo Brasileiro SA (NYSE:PBR, BVMF: PETR4)
Market Cap: $98.51B
P/E Ratio: 12.47
YTD Share Returns: 11.6%
Dividend Yield: 1.75%
Petróleo Brasileiro SA (Petrobras) is a semi-public Brazilian multinational petroleum company headquartered in Rio de Janeiro and Brazil’s most valuable company. The company has dual listing on NYSE and the Brazil Stock Exchange (Bovespa). The company operates in the oil, natural gas and energy industries, with a large offshore drilling program.
Petrobras shared the same fate as its European peers, reporting Q3 revenue of $19.42B, a 13.9-percent Y/Y drop despite beating by $190M. GAAP EPS of $0.18 badly missed by $0.21. The company was able to achieve 3.04m boe/day
In November, a consortium led by Petrobras and China’s Cnooc scored a decisive victory after the Brazilian government awarded them the most promising block in the country’s latest transfer of rights auction. The auction was uncontested though with the companies offering 23.24 percent–the minimum profit oil allowed for that block.
Here’s the thing about Petrobras: Until very recently, this wasn’t a very attractive stock at all. The stock has disappointed and underperformed for a long time. But that’s about to change because the company is set to double the crude it’s been handling for a decade, and it will just be lifting that crude without doing all the expensive work. That revelation along caused the stock to jump recently.
Why, exactly? The market wasn’t responding to the new block it landed with CNOOC. It was responding to the fact that a nice chunk of the oil from all those massive oil reserves that are about to be exploited will be handled by Petrobras. No everyone has caught onto this and the market is still dabbling. Petrobras is a cheap stock, but this could very well be its tipping point.
#4 Royal Dutch Shell Plc (NYSE:RDS.A, LON:RDSA)
Market Cap: $215.05B
P/E Ratio: 12.01
YTD Share Returns: 5.0%
Dividend Yield: 6.13%
Royal Dutch Shell PLC, better known to many people as simply Shell, is an Anglo-Dutch oil and gas company incorporated in the United Kingdom and headquartered in the Netherlands. Shell is listed on the NYSE and the London Stock Exchange.
Shell posted revenue of $86.59B (-13.5 percent Y/Y) during the last quarter but beat by $7.75B while GAAP EPS of $0.73 beat by $0.19. Net income attributable to shareholders tumbled 15 percent, with the company, unsurprisingly, pinning the blame on lower oil/gas prices and chemicals margins.
Shell is a buyback champ with a huge $25 billion program in place; however the company has lately been slammed after its management announced that it would delay purchasing its next tranche valued at $2.75B.
#5 OMV AG (OTCPK:OMVKY)
Market Cap: $17.57.65B
P/E Ratio: 9.12
YTD Share Returns: 36.3%
Dividend Yield: 3.28%
OMV is an integrated oil and gas company which is headquartered in Vienna, Austria. Though not boasting a market cap anywhere near $100B, we have included OMV on this list due to its exemplary performance with the shares up nearly 150 percent over the past five years and 36.3 percent this year.
Another distinction: OMV is still growing its top-and-bottom-lines despite a challenging macro environment.
For the third quarter, OMV reported revenue of €5.95B (+6.1 percent Y/Y) and GAAP EPS of €1.30. It’s revenue growth of 13.35% for the year is well above the sector median of 3.66%. Meanwhile, cash flow increased to €3.3B during the quarter at a time when many of its contemporaries are struggling to keep that metric afloat. The company says its strong refining and petrochemical margins have been helping it offset lower oil and gas prices.
OMV’s strong balance sheet and cash position makes it one of the energy plays that are better-placed to weather the ongoing storm.