4 Energy Stocks to Gain From the Prospering Integrated US Industry

Industry Overview - The Zacks Oil & Gas US Integrated industry includes companies involved in upstream and midstream energy businesses, focusing on oil and natural gas exploration and production, as well as transportation and storage [3] - Upstream operations are positively correlated to oil and gas prices, while midstream assets generate stable fee-based revenues [3] Current Market Environment - Despite a significant decline in crude prices, the pricing environment remains favorable for exploration and production activities [1] - Integrated energy firms' midstream segments are performing well due to consistent revenues from pipeline and storage fees [1] Key Trends - Oil prices are still favorable as the breakeven price in most U.S. shale plays is lower than current oil prices, allowing upstream operations to remain profitable [4] - Integrated companies' midstream businesses are less exposed to commodity price volatility, securing stable fee-based revenues through long-term contracts [5] - Companies are focusing on reducing greenhouse gas emissions and flaring rates in response to climate change concerns [6] Industry Performance - The Zacks Oil & Gas US Integrated industry has underperformed compared to the broader Zacks Oil - Energy sector and the S&P 500 over the past year, with a decline of 31.8% [9] - The industry currently holds a Zacks Industry Rank of 78, placing it in the top 32% of over 250 Zacks industries, indicating bright near-term prospects [7][8] Valuation Metrics - The industry is trading at an EV/EBITDA ratio of 4.61X, lower than the S&P 500's 14.66X but higher than the sector's 4.09X [13] - Over the past five years, the industry's EV/EBITDA has ranged from 3.33X to 14.35X, with a median of 5.02X [13] Notable Companies - ConocoPhillips (COP): Has a promising production outlook with lower debt exposure, positioned to withstand adverse business scenarios [15] - Occidental Petroleum (OXY): Significant presence in U.S. shale plays, with a reserve replacement rate of 230% in 2024 [17][19] - National Fuel Gas (NFG): Involved in developing resources in Marcellus and Utica shale plays, with a strong dividend payment history [22] - Epsilon Energy (EPSN): An independent natural gas and oil company with operations in Marcellus Shale and Permian basin, debt-free with stable cash flows [25]