As we delve into July, it’s time to take a hard look at some oil stocks to sell. The crude oil market has hit a rough patch over the past several months, with West Texas Intermediate (WTI) crude oil prices hovering slightly above the $70 per barrel mark. The specter of dampened demand, a potential global recession, and an overproduction of oil continue to weigh down the traditional energy sphere.
After a year of record-breaking profits in 2022, the sector now grapples with a harsh reality check. The oil industry presents multiple attractive opportunities for growth, but it can also be a hotbed for high-risk oil stocks.
As we navigate the choppy waters of July, protecting your portfolio from oil stocks should be a key strategy in these uncertain times.
APA Corporation (APA)
APA Corporation (NASDAQ:APA) finds itself navigating the tumultuous seas of the energy sector. The international oil exploration titan finds itself in choppy waters. Despite the geographical diversity of its operations, the company struggles with a myriad of challenges, particularly in its Alpine High natural gas operation and shifting tax landscapes in the North Sea.
APA savored a temporary respite last year, but the lurking specter of sustained low gas prices through 2024 casts a shadow over its future outlook. Coupled with a decelerating oil price environment, these factors have pressured APA’s production and bottom line downward.
Another key problem with the business is its dwindling financial strength. GuruFocus gave APA a measly 4 on 10 financial strength rating, with most metrics firmly behind sector averages. In addition, the stock has continued to move sluggishly, offering little upside ahead for investors.
Devon Energy Corporation (DVN)
Anchored in the heartland of Oklahoma City, Devon Energy Corporation (NYSE:DVN) remains one of the leading players to effectively tap into the massive U.S. oil and natural gas reserves. The cyclical ebb and flow of earnings in the energy space make it susceptible to the whims of global economic shifts, particularly concerning oil prices.
On the flip side, it’s imperative not to equate a stock’s dip with a golden buying opportunity. Devon Energy, for all its robust management and strategic measures, could find itself navigating stormy seas if oil prices continue to languish through 2024. Growth rates on a year-over-year basis are at an impressive 20% but are 10% lower than its 5-year average. Additionally, forward revenue estimates are incredibly worrying for the firm at just 9.9%. Its liquidity position also leaves a lot to be desired, marked by plummeting free cash flows over the past few years.
Frontline (FRO)
Despite the recent double-digit uptick in Frontline’s (NYSE:FRO) stock price, the sustainability of this rally hangs firmly in the balance. Frontline boasts a fleet of nearly 70 oil and oil product tankers and seems to be surfing the waves of favorable market trends. However, the company navigates choppy waters as the heat dissipates from current spot prices.
China’s reopening and Russian oil caps offer some relief, but the decision by OPEC+ to cut production clouds the horizon with weakened oil demand. Plus, spot rates are down almost 30% over the past year. If they don’t spring back, we could see a swift return to a normalized environment where FRO stock might hover near its fair valuation. On top of that, given the company’s negative dividend growth rate, its lofty dividend yield of over 18% is a red flag.
On the date of publication, Muslim Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
