Tag: BP p.l.c. (BP)

Geopolitical Risks in 2024: Why ExxonMobil (XOM) Could Be Your Best Energy Play

Posted on by The INO.com Team

The energy sector in 2024 finds itself at the intersection of intensifying geopolitical conflicts and evolving market dynamics. In the Middle East, tensions remain high, with key oil producers like Iran, Saudi Arabia, and Israel facing intermittent conflicts that could disrupt energy supplies. Meanwhile, the Russia-Ukraine conflict continues to impact the global energy supply chain, keeping European and global natural gas prices volatile. In addition to this, OPEC’s ongoing management of output remains a critical factor in stabilizing or destabilizing oil prices. 

Amid this turbulence, energy investors are seeking safe havens, and Exxon Mobil Corporation (XOM) stands out. Its global reach, diverse energy portfolio, and adaptability in transitioning towards cleaner energy alternatives could make it a more resilient option in a precarious energy market.

Let’s explore why ExxonMobil could be your best energy pick this year.

ExxonMobil’s Strategic Positioning: Mitigating Risks Through Global Reach 

ExxonMobil has established itself as a global energy giant with operations across key oil and natural gas regions, including North America, Africa, and the Middle East. This geographical diversity has allowed the company to mitigate risks from localized disruptions. A key example is Exxon’s ongoing success in Guyana and the Permian Basin, where it has achieved record production levels. This strategic balancing of assets ensures steady output even when geopolitical shocks threaten some regions.

In addition to its fossil fuel ventures, ExxonMobil is also investing heavily in renewable energy technologies, particularly carbon capture and storage (CCS). The company’s carbon capture initiatives have set industry benchmarks, with a recent agreement to store 5.5 million metric tons of CO2 per year. These innovations not only align with global decarbonization efforts but also position ExxonMobil for long-term growth, irrespective of traditional energy sector volatility.

Energy Sector Outlook: Oil Prices, OPEC, and the Energy Transition 

The energy market remains volatile, with oil prices staying between $60 to $80 per barrel. OPEC’s continued influence over supply means that any decisions to cut or boost production can swing prices significantly. For ExxonMobil, however, this volatility plays a role in its strengths. The company's increased focus on “advantaged assets,” such as its growing production from Guyana and the Permian Basin, provides a buffer against sudden price drops.

ExxonMobil’s heavy investments in energy transition also stand out. From the development of virtually carbon-free hydrogen to Proxxima™, a product that transforms lower-value gasoline molecules into high-performance resins, ExxonMobil is not just a fossil fuel player anymore. Its energy transition investments not only hedge against future regulatory risks but also attract new markets with high margins. This strategic shift gives ExxonMobil a crucial edge over other energy majors that are slower to adapt.

ExxonMobil vs. Competitors: A Clear Winner in Risk Management and Renewables 

When compared to its closest competitors like Chevron Corporation (CVX) and BP p.l.c. (BP), ExxonMobil's positioning in both fossil fuels and renewable technologies is more robust. Chevron has similarly diversified, focusing on U.S. shale and renewable natural gas, but it lacks Exxon’s scale in regions like Guyana and its aggressive moves into CCS. BP, meanwhile, has taken an ambitious turn towards renewables, but its focus on divesting from oil and gas has come at the cost of reduced cash flow from its upstream segment.

ExxonMobil, by contrast, manages geopolitical risk more effectively through its wide geographic spread, diverse asset portfolio, and continued dominance in oil and gas production. While it remains committed to energy transition, it hasn’t shed its traditional revenue sources prematurely, giving it the financial flexibility that BP currently lacks.

Investor Takeaway: Why ExxonMobil Stands Out 

Given the current geopolitical environment, ExxonMobil stands out as a compelling investment in the energy sector. Its strong second-quarter earnings of $9.2 billion, supported by record production and cash flow, underscores its financial resilience. Furthermore, Exxon’s aggressive capital expenditures, totaling $28 billion for the year, suggest the company is gearing up for sustained growth in both traditional and renewable sectors.

The combination of solid dividends—$4.3 billion distributed in the second quarter alone—and a robust share buyback program offers stability in volatile times. In a world where energy prices can be thrown into disarray by geopolitical shocks, Exxon’s diversified and well-balanced portfolio is likely to provide both stability and growth potential.

Palantir Joins the S&P 500: Is It Time to Buy Before the AI Surge?

Posted on by The INO.com Team

Palantir Technologies Inc. (PLTR) is set to join the S&P 500 index on September 23, 2024, alongside Dell Technologies Inc. (DELL) and Erie Indemnity Co. (ERIE), in the latest quarterly rebalancing by S&P Dow Jones Indices. Being included in the S&P 500 will likely enhance Palantir’s visibility and appeal to a broad range of institutional investors.

The inclusion in the S&P 500 will mark a significant milestone for PLTR, a data analytics and artificial intelligence (AI) leader. But the question now arises: is this the right time to buy Palantir stock, especially with the growing momentum around AI technology?

Palantir’s AI Growth Potential

PLTR’s solid position in the AI space makes it a compelling investment opportunity. The company has long been a leader in data analytics, working with government agencies, defense contractors, and large enterprises. With the recent AI boom, Palantir’s capabilities in machine learning (ML), predictive analytics, and AI-driven systems are more relevant than ever.

Recently, PLTR was recognized as a leader in AI/ML software platforms by renowned research and advisory firm Forrester. Palantir AI platform (AIP) offers an end-to-end architecture that powers real-time, AI-driven decision-making. With Palantir Foundry and Palantir Apollo, AIP forms the foundation of the “AI Mesh” architecture, which is becoming the benchmark for enterprises aiming to deliver composable, interoperable, and scalable value through AI.

From public health initiatives to battery production, organizations rely on Palantir to safely, securely, and effectively leverage AI — driving tangible operational outcomes across industries.

Grand View Research report suggests that the global AI market was valued at $196.63 billion in 2023 and is expected to grow at a CAGR of 36.6% from 2024 to 2030. PLTR’s specialized AI software platforms make it a key player in this rapidly expanding market.

Strategic Partnerships and Investments

This month, Palantir and bp p.l.c. (BP) announced an enterprise agreement that will extend their strategic relationship and introduce new AI capabilities with PLTR’s AIP software. The new contract will expand upon a decade of close collaboration, which has established a strong foundation for BP’s oil and gas production operations, utilizing Palantir’s industry-leading software.

Also, on August 8, PLTR and Microsoft Corporation (MSFT) announced a major enhancement to their partnership, aiming to deliver advanced and secure cloud, AI, and analytics capabilities to the U.S. Defense and Intelligence Community.

This first-of-its-kind, integrated suite of technology will enable critical national security missions to leverage Microsoft’s top-tier Large Language Models (LLMs) through Azure OpenAI (AOAI) Service within Palantir’s AI Platform (AIP) within Microsoft’s government and classified cloud environments. Through this collaboration, Palantir will deploy its suite of products – Foundry, Gotham, Apollo, and AIP – in Microsoft Azure Government and the Azure Government Secret (DoD Impact Level 6) and Top Secret clouds.

AI Momentum Lifted Sales and Guidance

PLTR generated $678.13 million in revenue for the second quarter that ended June 30, 2024, up 27.1% from the prior year’s quarter. That is compared to the consensus revenue estimate of $652.42 million. The company’s U.S. commercial revenue grew 55% year-over-year to $159 million, and its U.S. government revenue increased 24% year-over-year to $278 million.

The software company’s adjusted income from operations was $253.57 million, an increase of 87.8% from the prior year’s period. PLTR’s adjusted EBITDA rose 82.4% year-over-year to $261.62 million. Further, its adjusted free cash flow grew 54.8% from the year-ago value to $148.66 million.

Palantir posted a net income of $134 million for the second quarter, the largest quarterly profit in the company’s twenty-year history. Its adjusted EPS came in at $0.09, an increase of 80% year-over-year. That surpassed the consensus EPS estimate of $0.08.

Palantir CEO Alex Karp said the outstanding second-quarter results reflected the “unbridled demand for and understanding of the capabilities of our software.” Karp added, “The growth of our business has been re-accelerating steadily, and we see an unprecedented opportunity ahead to capture and build on that momentum.”

Amid the AI boom, the management raised full-year revenue guidance. For the third quarter of 2024, PLTR expects revenue of between $697-$701 million. The company’s adjusted income from operations is expected to be $233 million to $237 million.

For the full year 2024, the enterprise software company raised its revenue guidance to between $2.742-$2.750 billion. Palantir also increased its U.S. commercial revenue guidance to in excess of $672 million, representing a growth rate of at least 47%. Also, the company raised its guidance for adjusted income from operations to between $966-$974 million.

Bottom Line

PLTR’s inclusion in the S&P 500 index marks a significant milestone for the company, enhancing its visibility and appeal among institutional investors. This move, combined with Palantir’s strong foothold in the rapidly growing AI sector, positions it for further growth. The software giant’s innovative platforms like AIP, Foundry, and Apollo place it at the forefront of AI-driven transformations across industries.

The combination of Palantir’s expanding partnerships, increased revenue guidance, and impressive financial performance makes it an attractive investment. The stock has skyrocketed more than 112% year-to-date and around 128% over the past year, driven by surging demand for its AI-driven software platforms. Further, analysts issued a bullish outlook for Palantir.

BofA Securities analyst Mariana Perez maintained a Buy rating on PLTR and raised the price target on the stock from $30 to $50. Moreover, Daniel Ives from Wedbush maintained an Outperform rating on Palantir, with a price target of $38.

So, if you're looking to capitalize on the current AI boom, PLTR’s sound fundamentals and promising long-term outlook may present a golden opportunity for solid returns.

BP vs. OPEC: What Conflicting Oil Demand Projections Mean for Your Portfolio

Posted on by The INO.com Team

The oil and gas industry is a cornerstone of the global energy landscape, powering everything from cars and factories to homes. It plays a vital role in our daily lives and the broader economy. Its equilibrium between supply and demand holds significant implications for energy security, economic stability, and environmental sustainability.

However, the industry's complexity has bred persistent imbalances and volatility, posing challenges for policymakers, industry stakeholders, and consumers. Various factors, including geological constraints on production, advancements in extraction and refining technology, changes in global energy policies, evolving consumer habits, and stricter environmental regulations, significantly influence the oil & gas market. This complex interplay makes predicting supply and demand trends a tricky business.

In recent years, the oil and gas sector has witnessed transformative shifts driven by advances in technology, changes in global energy policies, and shifts in consumer behavior. The rise of unconventional oil and gas production alongside investments in renewables and energy efficiency has reshaped the market landscape. But what’s next for the sector?

BP Thinks Oil Demand Is Dropping, But OPEC Sees It Going Up. What's the Deal?

In the latest Energy Outlook, BP p.l.c. (BP) paints a picture of declining oil demand. The company projects that global oil demand will peak at around 102 million barrels per day (bpd) by 2025, after which the decline will depend on how aggressively countries slash carbon emissions.

In the current trajectory, oil consumption is expected to decline gradually, reaching approximately 75 million bpd by 2050 due to advancements in vehicle efficiency and the increasing adoption of alternative fuels, led by the electrification of cars and trucks. Under BP’s more ambitious "Net Zero" scenario, the company envisions a drastic reduction in oil demand, potentially plummeting to as low as 25-30 million bpd by 2050. That’s a considerable drop, driven by a faster move towards renewable energy and smarter energy use.

On the other hand, the Organization of the Petroleum Exporting Countries (OPEC) maintains an optimistic outlook on global oil demand. According to its monthly outlook, OPEC foresees robust growth in oil demand, projecting an increase of 2.25 million bpd in 2024 and a further 1.85 million bpd in 2025. This forecast hinges on resilient economic growth, particularly in major economies, and sustained demand from sectors such as air travel.

OPEC’s stance underscores its expectation that oil will continue to play a pivotal role in meeting global energy needs despite increasing pressure for climate action. The agency also raised its forecast for world economic growth this year to 2.9% from 2.8%, citing positive momentum in non-OECD countries.

"Economic growth momentum in major economies remained resilient in the first half. This trend supports an overall positive growth trajectory in the near term," OPEC said.

Bottom Line: What could these conflicting forecasts mean for your portfolio?

OPEC's projections also contrast sharply with those of the Paris-based International Energy Agency (IEA). While OPEC expects robust demand growth, the IEA takes a more conservative stance, forecasting growth of only 960,000 barrels per day in 2024. The IEA also predicts that global oil demand will peak at 106 million bpd by 2029, reflecting a global shift towards greener energy alternatives and reduced oil consumption in road transportation.

These contrasting perspectives stem from differing priorities. OPEC members emphasize the importance of high oil demand to support economic growth and stability, while the IEA prioritizes climate commitments and the affordability of energy solutions. The widening disparity in their forecasts complicates investment decisions, leaving investors uncertain about current demand levels. OPEC reported that the first-quarter oil demand averaged 103.5 million barrels per day, whereas the IEA estimated it to be 101.7 million barrels per day.

As analysts navigate these varying outlooks, investors must make crucial decisions amid evolving energy trends and geopolitical shifts. Understanding these divergences is essential for strategizing and aligning your portfolio with future market directions.

Navigating the ebb and flow of supply and demand in the oil and gas industry is the key to making smart investment moves. Geopolitical tensions, technological breakthroughs, and shifting market dynamics all shape these intricate patterns. Stakeholders who stay vigilant on these fronts can steer through market volatility and pinpoint promising opportunities.

Considering the sector's relatively bullish outlook, it could be wise for investors to scoop the shares of fundamentally sound energy stocks such as Secure Energy Services Inc. (SECYF), Cenovus Energy Inc. (CVE), and Energy Transfer LP (ET). Conversely, stocks with weaker fundamentals, like EQT Corporation (EQT) and Chesapeake Energy Corporation (CHK), may warrant caution.

Top Energy Stocks Amid Hurricane Season & Summer Demand

Posted on by The INO.com Team

Since April, oil has continued to trade at its highest levels, supported by robust energy demand and tight supplies. WTI crude oil futures inched up $82 per barrel yesterday, following the EIA report indicating a larger-than-expected drop in US crude stockpiles. US crude oil inventories decreased by 3.444 million barrels, surpassing the projected decline of 3 million barrels.

Meanwhile, the heightened travel and mobility and increased air conditioning usage during the summer months continue to push oil demand higher. Amid solid seasonal demand and the looming threat of hurricanes and geopolitical instability, investors could take advantage of surging oil prices by watching key energy stocks Shell plc (SHEL), BP p.l.c. (BP), Phillips 66 (PSX), and Valero Energy Corporation (VLO).

Impact of Hurricane Beryl and Potential Future Storms on Oil Production and Prices

Hurricane Beryl battered Southeast Texas with powerful winds and torrential rain, forcing the closure of oil ports, the cancellation of hundreds of flights, and leaving around 2.7 million homes and businesses without power. Beryl shut U.S. refineries and ports along the Gulf of Mexico, raising concerns about oil production and transportation disruptions. Oil output from the Gulf of Mexico is generally about 1.8 million barrels per day.

Historically, hurricanes have significantly resulted in production halts and evacuation of rigs and refineries, leading to supply constraints, which typically push oil prices upward. The impact of these weather events is two-fold: immediate supply disruption and longer-term infrastructure damage, which can keep prices elevated even after the storm has passed.

Increased Travel and Cooling During Summer Driving Higher Oil Prices

The summer season traditionally sees a surge in travel and mobility alongside air conditioning usage, driving up oil demand. This year is no exception, with intense summer demand for gasoline and jet fuel contributing to rising oil prices. OPEC maintained its forecast for robust global oil demand growth in 2024, citing resilient economic growth and a solid rebound in air travel during the summer.

In its latest Monthly Oil Market Report (MOMR), OPEC expects global oil demand to increase by 2.25 million barrels per day this year.

“Expected strong mobility and air travel in the Northern Hemisphere during the summer driving/holiday season is anticipated to bolster demand for transportation fuels and drive growth in the United States,” the agency said in the report.

Robust seasonal demand translates into higher revenues for companies involved in oil exploration, production, refining, and distribution, presenting an opportune time for investors to evaluate their energy sector portfolios.

Key Energy Stock Picks Amid Summer Demand and Tight Supply

Shell plc (SHEL)

Valued at a market cap of $228.02 billion, Shell plc (SHEL) is a prominent energy and petrochemical company. The company operates through Integrated Gas; Upstream; Marketing; Chemicals and Products; and Renewables and Energy Solutions segments.

Tobago Ltd., a subsidiary of SHEL and Shell Trinidad, recently took Final Investment Decision (FID) on the Manatee project, an undeveloped gas field in the East Coast Marine Area (ECMA) in Trinidad and Tobago. Manatee will enable Shell to competitively expand its Integrated Gas business by capitalizing on development efforts in the ECMA, one of the country’s most prolific gas-producing regions.

"This project will help meet the increasing demand for natural gas globally while also addressing the energy needs of our customers domestically in Trinidad and Tobago," stated Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director.

Shell aims to expand its LNG business by 20-30% by 2030 compared to 2022. LNG liquefaction volumes are projected to increase by 25-30% relative to 2022, as outlined at the company’s Capital Markets Day in 2023.

During the first quarter that ended March 31, 2024, SHEL reported LNG sales volumes of 16.9 MT in the Integrated Gas segment. Its adjusted earnings increased 5.9% quarter-on-quarter to $7.73 billion, reflecting solid operational performance across its business. Its adjusted earnings per share was $1.20, up 8.1% from the previous quarter.

The company’s adjusted EBITDA was $18.71 billion, up 14.5% from the prior quarter. Its cash flow from operating activities (CFFO) grew 6% sequentially to $13.33 billion. Also, its free cash flow came in at $9.80 billion, an increase of 41.7% from the previous quarter.

In the last earnings release, Shell also announced that it commenced a $3.5 billion share buyback program, anticipated to be completed by the second-quarter 2024 results announcement. Over the past four quarters, total shareholder distributions amounted to 41% of CFFO.

Analysts expect SHEL’s revenue and EPS for the second quarter (ended June 2024) to increase 21.1% and 31.2% year-over-year to $90.27 billion and $1.92, respectively. For the third quarter ending September 2024, the company’s revenue and EPS are expected to grow 24.5% and 14.3% year-over-year to $95.06 billion and $2.13, respectively.

Over the past six months, shares of SHEL have surged more than 15% and approximately 21% over the past year.

BP p.l.c. (BP)

With a $100.95 billion market cap, BP p.l.c. (BP) engages in the production of natural gas, and integrated gas and power; trading of gas; operation of onshore and offshore wind power, as well as hydrogen and carbon capture and storage facilities; and production of crude oil. It operates through Gas & Low Carbon Energy; Oil Production & Operations; and Customers & Products segments.

On June 13, BP’s subsidiary, Archaea Energy, and Republic Services, Inc. (RSG) celebrated the first renewable natural gas (RNG) plant in the companies’ Lightning Renewables joint venture (JV). The Archaea Modular Design (AMD) plant at Republic’s National Serv-All Landfill in Fort Wayne, Indiana, is the first of nearly 40 landfill gas-to-RNG projects targeted by the JV and is expected to come online this summer.

The Lightning Renewables JV portfolio supports Archaea’s goal of increasing production to more than 50 million mmBtu per year by 2030.

Also, in April, BP, as the operator of the Azeri-Chirag-Gunashli (ACG) project, announced the start-up of oil production from the new Azeri Central East (ACE) platform. This platform is part of the ACG field development in the Azerbaijan sector of the Caspian Sea and is the first remotely operated offshore platform in the Caspian.

In the first quarter that ended March 31, 2024, BP’s reported production from the Oil Production & Operations segment was 1,463 mboe/d, up 7.6% from the first quarter of 2023. Its upstream production grew 2.1% year-over-year. Its underlying replacement cost (RC) profit was $2.72 billion, or $16.24 per share, respectively.

Furthermore, the company’s adjusted EBITDA for the quarter was $10.31 billion. Profit for the period attributable to BP shareholders rose significantly quarter-on-quarter to $2.26 billion.

“We’ve delivered another resilient quarter financially and continued to make progress on our strategy. Oil production was up and our ACE platform in the Caspian is now producing. We are simplifying and reducing complexity across bp and plan to deliver at least $2 billion of cash cost savings by the end of 2026 through high grading our portfolio, digital transformation, supply chain efficiencies and global capability hubs,” said BP’s CEO, Murray Auchincloss.

Moreover, the $1.75 billion share buyback program announced for the first quarter of 2024 was completed on May 3, 2024, part of the company’s $3.5 billion commitment for the first half of 2024. A resilient dividend is BP’s top priority within its disciplined financial frame. For the first quarter, the company announced a dividend per ordinary share of 7.27 cents ($0.0727).

Street expects BP’s revenue for the second quarter (ending June 2024) to increase 4.4% year-over-year to $50.65 billion. The consensus EPS estimate of $1.07 for the current year indicates an improvement of 19.7% year-over-year. Additionally, BP’s stock has gained marginally over the past six months.

Phillips 66 (PSX)

With a market cap of $56.54 billion, Phillips 66 (PSX) is a leading energy manufacturing and logistics company. It operates in four segments: Midstream; Chemicals; Refining; and Marketing and Specialties (M&S).

In May, Phillips 66 agreed to acquire Pinnacle Midland Parent LLC from Energy Spectrum Capital to expand its natural gas gathering and processing footprint in the Midland Basin. Pinnacle’s assets consist of the newly built Dos Picos natural gas gathering and processing system: a 220 MMcf/d gas processing plant, 80 miles of gathering pipeline, and 50,000 dedicated acres through high-quality producers in one of PSX’s focus basins. 

Pinnacle is a bolt-on asset that enhances PSX’s wellhead-to-market strategy and complements its diverse and integrated asset portfolio. Moreover, this acquisition aligns with its long-term goals of expanding its natural gas liquids value chain, maintaining disciplined capital allocation, and creating sustainable value for its shareholders.

On April 3, the Board of Directors of Phillips 66 declared a quarterly dividend of $1.15 per share, representing an increase of 10%. The dividend was paid on June 3, 2024, to shareholders of record as of the business close on May 20, 2024. The dividend increase demonstrates the company’s confidence in its growing mid-cycle cash flow generation and disciplined capital allocation strategy.

Since its formation in 2012, PSX has consistently raised its dividend, resulting in a CAGR of 16%. Moreover, the company is well-poised to continue delivering substantial shareholder value by executing its strategic priorities, including returning $13-$15 billion to shareholders via dividends and share repurchases from July 2022 to the year-end 2024.

During the first quarter that ended March 31, 2024, PSX posted revenue of $36.44 billion, exceeding analysts’ expectations of $33.56 billion. Its adjusted earnings were $822 million, or $1.90 per share, respectively. During the quarter, refining operated at 92% crude utilization. As of March 31, 2024, the company had cash and cash equivalents of $1.60 billion and $3.50 billion of committed capacity under its credit facility.

In addition, Phillips 66, through the successful execution of its strategic priorities, remains committed to increasing mid-cycle adjusted EBITDA to $14 billion by 2025 and returning more than 50% of operating cash flow to shareholders.

Shares of PSX have surged around 3% over the past six months and more than 33% over the past year.

Valero Energy Corporation (VLO)

Valued at a market cap of $47.65 billion, Valero Energy Corporation (VLO) manufactures, markets, and sells petroleum-based and low-carbon liquid transportation fuels and petrochemical products internationally. The company operates through Refining; Renewable Diesel; and Ethanol segments.

VLO owns 15 petroleum refineries in the U.S., Canada, and the United Kingdom, with a total throughput capacity of about 3.2 million barrels per day. Additionally, Valero is a joint venture partner in Diamond Green Diesel Holdings LLC, which owns two renewable diesel plants in the Gulf Coast region with a combined production capacity of nearly 1.2 billion gallons per year.

Valero also owns 12 ethanol plants in the Mid-Continent region, with a combined production capacity of around 1.6 billion gallons per year.

In the last earnings report, the company provided a strategic update on the Sustainable Aviation Fuel (SAF) project at the DGP Port Arthur plant. The project is progressing ahead of schedule and will likely be operational in the fourth quarter of 2024. It is anticipated that this will give the plant the flexibility to upgrade about 50% of its current 470 million gallons annual renewable diesel production capacity to SAF. Once completed, DGD is expected to become one of the world’s largest SAF manufacturers.

VLO reported revenues of $31.76 billion for the first quarter that ended March 31, 2024. The company’s net income and earnings per common share were $1.33 billion and $3.75, respectively. Net cash provided by operating activities was $1.80 billion for the quarter.

During the quarter, Valero returned $1.4 billion to stockholders, including $356 million paid as dividends and $1 billion as the purchase of about 6.6 million shares of common stock, resulting in a payout ratio of 74% of adjusted net cash provided by operating activities. The company paid a regular quarterly cash dividend of $1.07 per share on June 28, 2024.

VLO’s stock has soared over 16% over the past six months and is up approximately 28% over the past year.