The overall energy market has seen a decline since the end of 2022. Stocks within the energy and oil and gas sectors saw a large amount of growth in 2022 while the broader was falling. This was due to multiple factors, including the war in Ukraine, supply chain disruptions, higher demands for goods, and increased travel following the pandemic. This caused energy stocks to see a very profitable 2022. Since then, the energy market has somewhat stabilized. And stocks within the sector are trying to contend with profits in 2022.
Energy stocks have been falling recently while the overall market is in a state of recovery. Even with the energy market in a downturn, here are a few stocks to avoid going forward.
Transocean (RIG)
Transocean (NYSE:RIG) is a Swiss company that operates an offshore drilling business. Transocean operates nearly 70 offshore drilling rigs, primarily in the South Pacific.
The company reported its first-quarter earnings in May, and its net loss more than doubled from the previous year. Transocean said some of their oil rigs were non-operational in the fourth quarter of 2022. This leads to uncertainty surrounding revenue growth for the company if some of its rigs are not currently operational.
The company is currently trading at $6.16, which leaves the share price vulnerable to dropping into penny stock territory, which would be $5 per share. Based on investors’ outlook, this could be an adverse event for the company.
Frontline (FRO)
Frontline (NYSE:FRO) it is an oil and gas transportation company based in Cyprus, with of fleet of 70 different vessels. With Frontline, a big draw to investing in the company is their dividend payout, which is currently sitting at $0.70 per share for the first quarter of 2023. While their share price is $15.74, and they have a forward dividend yield of 28%. Since the second quarter of 2022, Frontline has increased its quarterly dividend by over 350% from $0.15 to $0.70 per share.
They have seen significant revenue growth in the first quarter that more than doubled compared with the previous year. But this considerable increase in their overall dividend payout seems unsustainable. And is likely to be lowered in the future, with the demand for shipping beginning to level off, and the company may focus on the present than future growth.
Devon Energy (DVN)
Devon Energy (NYSE:DVN) is an energy company based in Oklahoma City, Oklahoma. They focus on developing oil and natural gas reserves located in the U.S.
The company has seen a nearly 30% in their share price over the last year. Their most recent earnings release reported that total revenue and net earnings for the first quarter were practically unchanged compared to the first quarter of 2022.
Devon Energy announced a 50% increase in the share repurchase program to $3 billion and a quarterly dividend of $0.72. Following this earnings news, the company’s share fell by 17%. Investors perceived this earnings report as unfavorable, even with the information about the share repurchase program and the dividend increase.
Investors seem unsure about the company. Their stock price has continued to fall over the year, even after perceived positive earnings results.
On the date of publication, Noah Bolton did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
