The political chaos in North Africa and Middle East caused Brent oil price to hit $110 a barrel for the first time since 2008. Although IMF spokesman David Hawley stated that much of the increase in oil prices through early January reflected increasing global demand as the world economy recovers from the financial crisis; there is a possibility that the retail price per gallon might reach a new record high above $4.
Legendary investors George Soros and Jim Rogers are among the several hedge fund managers who are bullish about commodities. T. Boone Pickens has been investing in energy stocks. Boone Pickens is extremely bullish about 10 energy stocks and he added new money in these holdings during the most recent quarter. John Burbank’s Passport Capital is also extremely bullish about energy shares (See Passport’s bullish comments about oil).
While the increasing gasoline costs are definitely not good for consumers, it benefits those who invest in energy stocks. We screened for the top 9 large cap oil and gas companies with a dividend yield of at least 3%. All the companies in this list have a minimum market capitalization of $10 Billion and maximum P/E ratio of 20. Only 2 US headquartered companies made it into our list.
ConocoPhillips (COP): COP is an international, integrated energy company that explores for, produces, transports and markets crude oil, natural gas, natural gas liquids and bitumen worldwide. The company has a 20% ownership in LukOil (LUKOY) which has a marketing network of 25 countries, with the majority of wholesale and retail sales in Russia, the United States and Europe. ConocoPhillips has an EPS of 7.61 and thanks to its high growth, dividends increased by three-fold in the last 10 years.
Eni S.p.A. (ADR) (E): Eni operates in the oil and gas, electricity generation and sale, petrochemicals, oilfield services construction and engineering industries. In these businesses, it has a strong edge and leading international market position. Eni has operations in 77 countries. The company has a P/E ratio of 10.18 and an institutional ownership of 2%. Eni has an operating margin of 16.22% and pays regular dividends, twice a year.
PetroChina Company Limited (PTR): PetroChina is the largest oil and gas producer and seller in the China. While similar sized companies compete on a global scale, PetroChina has almost a monopoly position in China. Current dividend yield is 3.18%. Revenues increased by two fold in the last 5 years. In the last 10 years, the stock price increased 10-fold; from $15 in 2001 to $150 in 2010.
Repsol YPF, S.A. (ADR) (REP): Repsol is a Spain headquartered integrated oil and gas company engaged the petroleum business. Repsol posted net income of 4.693 billion Euros for 2010 compared to 1.559 billion Euros in the previous year. Net debt at the end of 2010, excluding Gas Natural Fenosa, was cut by 65% to 1.697 billion Euros. The P/E ratio of 10.24 is among the lowest in the industry.
Royal Dutch Shell plc (ADR) (RDS.A): Royal Dutch Shell is an independent oil and gas company. The Company owns, directly or indirectly, investments in the numerous companies constituting the Group. Shell is engaged worldwide in the aspects of the oil and gas industry and also has interests in chemicals and other energy-related businesses. The company has a dividend yield of 4.74% and a P/E ratio of 10.76. The total debts/total assets ratio of 13.74 is among the lowest between in the sector.
SeaDrill Limited (SDRL): SeaDrill an American company (headquartered in Bermuda) active within the oil and gas industry. It primarily engages in offshore drilling business. The company has a 42.17% operating margin and the current dividend yield of 6.95 is above industry. 5 year growth rate of company is 248.11%. It also has a stable dividend policy. Quarterly dividends increased by almost threefold; from 0.22$ in 2007 to 0.65$ in 2010.
Statoil ASA (ADR) (STO): Statoil ASA (Statoil) is an integrated energy company based in Norway with locations in approximately 40 other countries worldwide. The company accounts for approximately 80% of all Norwegian gas exports. Statoil has a regular dividend policy; company paid 0.45$ in 2009 and 0.92$ in 2010. Total debt/total assets ratio of 15.52 together with a Price/Sales ratio of 0.87 indicates the company as one of the top performers of Europe in the sector.
TOTAL S.A. (ADR) (TOT): TOTAL together with its subsidiaries and affiliates worldwide, is an integrated international oil and gas company with operations in more than 130 countries. The current P/E ratio of 9.16 is among the lowest in the sector and the dividend yield is 4.95%.
YPF SA (ADR) (YPF): YPF SA is an integrated oil and gas company. The upstream operations consist of the exploration, development and production of crude oil, natural gas and liquefied petroleum gas [LPG] .The Company has a beta of 0.85 and current dividend yield of 5.72% is above the average in the energy sector. The company is also very profitable with a gross margin of 34.14% and an operating margin of 20.39%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.