Oil companies have just begun reporting fourth-quarter earnings, and analysts expect many of them to show large increases in free cash flow. Investors have been particularly focused on cash generation, because they want oil companies to spend more on dividends and buybacks, and the companies need to pump out cash to fund those programs.
To find companies that can check that box for investors, Barron’s screened for energy companies in the S&P 1500 with the largest expected growth in free cash flow for the coming quarter, compared with the previous quarter. We limited the search to those with market caps of at least $5 billion, and filtered out companies that may have benefited from one-time events like major mergers.
Growing Cash Hauls
These energy stocks are expected to report growing amounts of free cash flow
| Company / Ticker | Price | Market Cap (Bil) | FCF Growth* | 3-Month Price Change |
|---|---|---|---|---|
| ONEOK / OKE | $56.68 | 26 | 113% | -9.0% |
| Marathon Oil / MRO | 17.55 | 14 | 55 | 11.9 |
| EOG / EOG | 98.37 | 59 | 43 | 10.7 |
| PDC Energy / PDCE | 53.06 | 5 | 38 | 6.1 |
| Pioneer Natural Resources / PXD | 199.93 | 14 | 32 | 9.7 |
*Based on analysts’ estimates for the upcoming quarter
Source: Factset
Tulsa-based ONEOK (ticker: OKE) owns pipelines and other assets that transport natural gas liquids throughout the country. It has benefited from rising prices for natural gas, and overall higher natural gas demand.
Marathon Oil (MRO) is an oil and gas producer out of Houston that has gained as oil and gas prices have risen. Truist analyst Neal Dingmann wrote last month that he had met with Marathon management and “the company’s excitement over strong continuous shareholder returns was contagious…Not only does the current quarter sound positive, but confidence in our first-quarter free cash flow estimate has increased from an already lofty level.”
EOG Resources (EOG) is one of the country’s largest independent shale oil producers. The company has been focused on growing its dividend, more than tripling the annual payout over the last three years. It’s now on track to pay out $3 a year, for a dividend yield of 3%. And it issued a special dividend of $2 per share late last year.
PDC Energy (PDCE) and Pioneer Natural Resources (PXD) are also independent oil and gas producers. Pioneer was one of the first companies to announce a strategy of paying out a variable dividend on top of its base dividend. “Given our constructive outlook on crude, Pioneer remains one of our top picks in large-cap universe given quality in the underlying inventory depth which will likely cause the equity to continue to appreciate as the back end of the curve moves higher,” wrote analysts at Tudor Pickering Holt this month.
Write to Avi Salzman at [email protected]
