3 Energy Stocks Linked To Higher Oil Prices And Drilling Demand

Oil above $90, war risk in the Strait of Hormuz and a more hawkish US Federal Reserve have pushed energy back into the spotlight, with inflation, rates and long term yields all in focus again. That mix can reshape which stocks benefit and which come under pressure. This article walks through three large integrated oil and gas and energy producers in the screener that appear most exposed to this news backdrop and explains why their stories matter now.

The three stocks highlighted below are just a sample from this theme. The full screen surfaced 24 more large integrated oil, gas and energy producers with equally compelling narratives that are not covered here. To identify and analyze the highest conviction opportunities in this space, head straight to the Global Integrated Oil & Gas and Energy Producers screener.

Technip Energies (ENXTPA:TE)

Technip Energies is an engineering and technology company that designs and delivers large energy projects for integrated oil majors and upstream producers, which links it closely to the Global Integrated Oil & Gas and Energy Producers theme even though it is not a producer itself. Most of its revenue comes from the Project Delivery segment at about €5.7b, with a further €1.7b from the Technology, Products and Services arm that covers process technology, consulting and lifecycle services. The company has a market cap of roughly €5.4b, putting it in the large cap bracket that many investors often associate with scale and balance sheet depth in energy capex cycles.

Technip Energies provides exposure to global energy capex, LNG and decarbonization projects without taking direct commodity price risk. Its €5.7b Project Delivery arm and €1.7b Technology, Products and Services segment link into LNG, carbon capture and low carbon fuels, while recent contracts in the Middle East and Mozambique reflect the current focus on energy security and new export routes. At the same time, investors may want to consider margin pressure, a funding model that leans on external debt and a dividend that is not fully covered by free cash flow.

Technip Energies offers scale in LNG and low carbon projects, yet its debt funding and dividend coverage raise big questions. Get the fuller picture with the 3 key rewards and 2 important warning signs.

Pason Systems (TSX:PSI)

Pason Systems fits neatly into the Global Integrated Oil & Gas and Energy Producers theme as the data and automation layer that drilling contractors and producers rely on when rigs are turning. The company supplies instrumentation, automation software and real time data services that help customers drill faster, extend equipment life and connect the wellsite to office decision makers. Pason Systems has a market cap of about CA$1.2b, which places it in the mid to large cap bracket that many investors associate with scale and staying power in energy cycles.

Pason Systems provides exposure to drilling activity rather than pure commodity pricing, with tools such as AutoDriller, DataHub and real time gas and mud analyzers that are designed to raise revenue per rig day as adoption grows. At the same time, the company is expanding into newer areas such as completions, solar and energy storage, which could help smooth earnings if North American drilling slows, but currently involve thinner margins and higher investment needs. The company also has an unstable dividend record and significant exposure to North American rigs, so the impact of any period of higher oil prices would likely interact with operational leverage and energy transition risks, and the overall outcome would depend heavily on execution and discipline around capital and costs.

Pason Systems looks like an overlooked way to play drilling efficiency as rigs get smarter and data driven. Get the full story in the analysis report for Pason Systems

CES Energy Solutions (TSX:CEU)

CES Energy Solutions gives you direct exposure to the Global Integrated Oil & Gas and Energy Producers theme through its consumable fluids and specialty chemicals that are tied to drilling and production activity. Almost all of its CA$2.7b in revenue comes from oil and gas contract drilling related services, while a footprint across Canada and the United States keeps it close to North American upstream spending. With a market cap of about CA$3.9b, CES Energy Solutions sits in the larger end of energy services stocks that many investors associate with scale and staying power in long capex cycles.

Investors looking for a way to tap into sustained higher oil prices without owning a producer may find CES Energy Solutions worth a closer look. The company is tightly linked to drilling and production chemicals, has high reported ROE and has been using refinancing, dividends and buybacks to reshape its balance sheet and capital returns, yet it also carries meaningful debt and depends on customers that can pull back budgets if rates stay higher for longer. How that trade off plays out, with management eyeing acquisitions, new contracts and ESG focused products just as the Iran conflict keeps oil elevated, is where the opportunity and the risk sit for CES Energy Solutions. 3 key rewards and 1 important warning sign

CES Energy Solutions is reshaping its balance sheet while leaning on high reported ROE and active capital returns. See how that risk reward trade off really looks in the 3 key rewards and 1 important warning sign

Seeking Alternatives Beyond Oil Majors?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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