Crude oil prices have hovered between $75 and $85 a barrel since the start of this year, despite the ongoing conflict in the Middle East due to Israel’s war with Hamas. This has led to a continued slump in energy stocks, which have badly trailed the overall market for the better part of a year now. OPEC+ recently announced that it is extending its output reductions until the second quarter of this year. In a written statement, the oil cartel said it is extending the output cuts to support the short-term price stability of crude oil.
Analysts say the extension until the end of June shows OPEC+ is determined to put a floor under crude prices at $80 per barrel. However, it remains to be seen whether the latest move by OPEC+ will have a significant impact on crude prices. With war raging in the Middle East, many analysts thought crude prices would be well above $100 a barrel by now. Yet prices have largely stagnated. Here are three lagging energy stocks to sell in this year’s first quarter.
Chevron (CVX)
Like most energy stocks, U.S. oil giant Chevron (NYSE:CVX) is off to a soft start this year. Since January, CVX stock has been flat (down 0.2%). Over the last six months, however, shares are down 10% and appear to be accelerating on news that its $53 billion acquisition of Hess (NYSE:HES) is in trouble. A dispute has emerged over the rights to a giant Guyana oil block that is at the center of the deal to purchase Hess.
At the same time, the Federal Trade Commission (FTC) is delaying the acquisition. It is requesting additional information on the deal and has shown itself to be skeptical of its merits. Problems with the Hess takeover emerged shortly after Chevron reported declining sales as part of its most recent financial results. The company announced revenue of $47.18 billion compared to the $51.62 billion Wall Street expected. Chevron said it continues to struggle with volatile crude oil prices.
Kinder Morgan (KMI)
Kinder Morgan (NYSE:KMI) is a little different in that it is an energy infrastructure company. The company owns and controls oil and gas pipelines and terminals across North America. Currently, Kinder Morgan owns more than 83,000 miles of crude oil and natural gas pipelines and 143 terminals. You’d think that with that kind of breadth the company and its stock would be performing well. But no. Year-to-date, KMI stock is down 2%, bringing its five-year performance to a loss of 11%.
Not even a quarterly dividend of 28 cents per share for a yield of 6.44 is enough to attract investors to KMI stock. While the dividend remains high, the company actually cut it by 75% back in 2016 as it moved to focus on investments in needed capital projects. Those investments haven’t helped the company much as its debt has ballooned and its earnings have missed targets. The company has turned to liquefied natural gas (LNG) for future growth opportunities. But it remains to be seen whether that will payoff or not.
British Petroleum (BP)
European energy giant British Petroleum (NYSE:BP), or BP as it is commonly known, continues to be a crushing disappointment. BP stock has fallen 12% over the last year and is down 16% through five years. The boom in oil and gas stocks during 2022 has done nothing to help long-term shareholders. The company recently reported that its net profit for all of last year came in at $13.80 billion. That is half the $27.70 billion it earned in 2022.
BP has tried to boost its flagging share price. It recently announced it will buy back $3.5 billion of its own stock in this year’s first half. Through the end of 2025, the company plans to buy back $14 billion of its own stock. However, the stock buybacks have done little to move the needle on BP stock. The share price continues to languish as the company’s profits slump. Many analysts and investors also remain skeptical of BP’s plans to transition to cleaner forms of energy. All of the above make this a stock to offload in Q1.
On the date of publication, Joel Baglole did not have (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.
