Oil price drop offers opportunities.
Oil recently had its worst week in more than a decade, with the price of West Texas Intermediate crude oil falling more than 20% in a matter of days. The price drop came in response to plummeting global travel due to the COVID-19 outbreak and a potential price war between Saudi Arabia and Russia. Event cancellations, travel bans and quarantines have weighed on crude oil stocks. Analysts say the energy sector may struggle in the near term, but there are opportunities to buy the dip for international oil stock investors. Here are seven international oil stocks to buy today, according to CFRA.
PetroChina Co. (ticker: PTR)
PetroChina is the largest oil and gas company in China, the epicenter of the COVID-19 outbreak. Analyst Ahmad Halim says PetroChina's valuation is attractive, especially after the stock has dropped 36.2% in 2020 and 50.5% overall in the past year. The sell-off has driven its dividend yield up to 7.3%. Halim says earnings growth for PetroChina will be hard to come by in the current environment, but the stock has less exposure to downstream weakness than its primary Chinese competitor Sinopec. CFRA has a "buy" rating and $57 price target for PTR stock.
Total is one of the world's largest oil and gas majors, and its stock has taken a particularly large 46.1% hit so far in 2020. Analyst Jia Man Neoh says Total has a history of reporting steady growth numbers regardless of the external macroeconomic environment. The company also has a strong pipeline of project startups in 2020. Its tight cost controls mean Total can be pre-dividend cash-flow neutral even with crude prices in the mid-$20s. Total also pays a sizable 9.7% dividend. CFRA has a "strong buy" rating and $61 price target for TOT stock.
Neoh says a sharp drop in BP's oil spill-related payments from $3.2 billion in 2018 to around $1 billion in 2020 and beyond will help the company lower its cash flow break-even crude oil price point to less than $40 per barrel by 2021. Neoh says BP's 14-year reserve life is among the highest in the industry, and the company has been successful in maintaining reserves in recent years. He expects BP will continue to sell assets to improve its balance sheet and maintain its 11.8% dividend. CFRA has a "buy" rating and $42 price target for BP stock.
Cnooc is a pure-play Chinese oil and gas exploration and production company. Cnooc shares are down 39.6% in 2020, but Halim says the company can continue to offset the negative impact of lower oil prices via production growth and cost controls. In addition, the company has the highest earnings before interest, taxes, depreciation and amortization margins among its Chinese energy peers. The stock also pays a 9.2% dividend. Halim says management is focused in maintaining production growth and has a solid pipeline of projects lined up. CFRA has a "strong buy" rating and $179 price target for Cnooc stock.
Pembina Pipeline Corp. (PBA)
Pembina Pipeline is a Canadian oil and gas transportation and midstream services company. Analyst Paige Meyer says Canada has a huge demand for additional pipelines thanks to a supply glut that may get even worse following the recent drop in oil prices. Pembina shares are down 54.7% year-to-date, but Meyer says investors seem to be overestimating the business' exposure to commodity prices. Meyer estimates less than 15% of Pembina's earnings before interest, taxes depreciation and amortization are exposed to oil and gas prices. CFRA has a "buy" rating and $40.96 price target for PBA stock.
Engbridge is a Canadian multinational oil and gas transportation and infrastructure company with extensive operations in both Canada and the U.S. Meyer says Enbridge will benefit from the same Canadian supply glut that will drive demand for Pembina. Enbridge completed a timely $8 billion asset sale in the second half of 2019, shoring up its balance sheet ahead of the recent downturn. Meyer says Enbridge has plenty of growth capital projects ahead that should keep the company on the right track in the long term. CFRA has a "buy" rating and $34.22 price target for ENB stock.
Suncor Energy (SU)
Suncor Energy is a Canadian integrated oil exploration and production company. Meyer says Suncor has a large portfolio of long-life, low-decline assets that should provide stable, robust cash flow for at least the next two years. Over time, Meyer says new rail capacity in Canada will help Alberta ease its government-mandated production cuts, a potential tailwind for Suncor. Suncor also has the stamp of approval of Wall Street icon Warren Buffett. Buffett's Berkshire Hathaway (BRK.A, BRK.B) owns more than $211 million in Suncor shares. CFRA has a "buy" rating and $23.70 price target for SU stock.
International oil stocks to buy when prices fall:
-- PetroChina Co. (PTR)
-- Total (TOT)
-- BP (BP)
-- Cnooc (CEO)
-- Pembina Pipeline Corp. (PBA)
-- Enbridge (ENB)
-- Suncor Energy (SU)