The U.S. stock market remains deeply in the red, with a barrage of on-and-off tariff announcements by U.S. President Donald Trump creating confusion and uncertainty. Two weeks ago, Trump unveiled steep tariff hikes, before turning around and issuing a 90-day pause on what the administration calls ‘reciprocal tariffs.’ Trump announced that a baseline tariff rate of 10% would remain in effect during the negotiation period. Energy (-3.3% YTD) is among the nine sectors of the stock market in the red so far in the year, with only Utilities (+3.6%) and Consumer Staples (+4.6%) in the green.
Several Wall Street analysts have warned of a looming recession thanks to the ongoing tariff snafu. A good 80% of fund managers surveyed by Bank of America have singled out a global recession triggered by a trade war as the most significant risk facing markets today. However, the fate of oil and gas stocks depends on whether or not the country is able to avoid sliding into a full-blown recession. According to Fidelity Research, the U.S. economy is entering the late phase where the energy sector usually outperforms the market. Trump recently told Time Magazine that it’s just a matter of weeks before he is done with the tariff fiasco: “I would say, over the next three to four weeks, and we’re finished, by the way,” Trump said of the deals. “I’ve made 200 deals. [….] I will set a fair price of tariffs for different countries,” the President added.
Source: Fidelity Research
Given this backdrop, here are 3 oil and gas stocks to add to your portfolio amid the ongoing economic uncertainty.
#1. Energy Transfer LP
Market Cap: $60.4B
52-Week Returns: 9.4%
Energy Transfer LP (NYSE:ET) is a publicly-traded master limited partnership (MLP) that provides energy-related services in the United States. Energy Transfer owns and operates natural gas transportation pipelines and storage facilities, including 12,200 miles of intrastate natural gas transportation pipelines and 20,090 miles of interstate natural gas pipelines. ET also sells natural gas to electric utilities and independent power plants.
According to RBC Capital analyst Elvira Scotto, Energy Transfer is about to benefit from Waha price spreads (the price difference between natural gas traded at the Waha Hub and the benchmark Henry Hub price). Natural gas at the Waha hub–a regional pricing hub for gas in the Permian Basin in West Texas–sold for near-zero or sub-zero prices for much of 2024, a trend that has continued in the current year. Indeed, prices at the hub spent 164 days in negative territory and hit an all-time low -$7/mmbtu at the end of August, truly historical lows. The Permian Shale boom led to a surge in associated gas production, with output growing more quickly than takeaway capacity. Consequently, Permian gas infrastructure has become saturated in recent years, effectively meaning that producers sometimes have to pay for someone to take their gas so that they can continue to produce something more valuable: crude oil.
Energy Transfer is a top dividend stock, with a current yield at 7.4%.
#2. The Williams Companies
Market Cap: $72.8B
52-Week Returns: 49.2%
The Williams Companies Inc. (NYSE:WMB) is one of the largest energy infrastructure companies in the United States, operating 33,000 miles of pipelines in total, which it says account for a third of the transported gas in the U.S. The company has been posting solid results, with the recent pop in electricity demand growth, particularly from artificial intelligence (AI) data centers, likely to keep demand for the company’s gas pipelines high.
WMB has continued to expand its gas infrastructure. Last year, the company completed the purchase of facilities with transport links from Hartree Partners for $1.95 billion. The gas assets include six underground natural gas storage facilities in Louisiana and Mississippi with a total capacity of 115 Bcf, 30 pipeline interconnects to attractive markets, including connections to Transco, and 230 miles of gas transmission pipeline. Transco is the largest U.S. natural gas transmission pipeline
Scotto is bullish on WMB stock, citing dry gas opportunities, long-term AI/data center growth opportunities, and the timing of growth projects coming online.
“We think investors favor WMB’s natural gas-focused operations currently as the impact to natural gas demand is lower vs crude oil in a downturn given the underlying demand support from increasing LNG exports and AI/datacenters,” Scotto told CNBC.
#3. Golar LNG
Market Cap: $4.2B
52-Week Returns:60.2%
Golar LNG Limited (NASDAQ:GLNG) is a provider of Floating LNG (FLNG) services. According to the company, ’’A floating facility takes less time to build than a land-based facility. Reduced lead times mean a quicker return on investment – and therefore a more attractive investment proposition. Our innovative FLNG solution, which focuses on the liquefaction of clean, lean, pipeline-quality gas, is one of the cheapest and cleanest liquefaction alternatives in today’s market.’’
Shell plc (NYSE:SHEL) estimates that offshore fields hold at least 300,000 billion cubic feet of natural gas, of which ~40% of this gas is effectively ‘stranded.’ Golar LNG’s FLNG services help gas producers to take advantage of stranded gas assets. Golar has reported that it continues to see strong demand for LNG globally. The company has been able to grow profits at an impressive 44% CAGR over the past five years while returning the lion’s share to shareholders.
By Alex Kimani for Oilprice.com
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