Devon Energy Stock And 2 Energy Picks For Higher Oil Prices

Geopolitical risk in the Middle East is back in focus, and the energy sector is feeling it first. US strikes on Iran, a more than 6% jump in oil prices, and tighter sanctions on Iranian crude are reshaping expectations for supply security and trade routes. That mix of tension and price swings can reshape how investors think about oil and gas producers and oilfield services stocks. This article walks through 3 stocks from our Energy Sector Stocks screener that appear especially exposed to the latest news, outlining factors that may help you decide whether they merit closer attention or extra caution right now.

HMH Holding (HMH)

Overview: HMH Holding is an equipment and services company that supplies critical drilling gear such as blowout preventers, hoisting systems, and mud pumps, plus aftermarket parts and digital solutions for offshore and onshore oil, gas, and mining operators.

Operations: HMH Holding generates about US$450.1 million of revenue from its ESS segment and US$375.0 million from PCS, partially offset by US$30.4 million of eliminations between segments.

Market Cap: US$791.7 million

HMH Holding sits at the heart of drilling activity, so rising oil prices and renewed focus on energy security can support demand for its equipment, spare parts and services, even as recent Middle East tensions create some short term disruption for certain jack up and land rigs. Analysts expect earnings growth to outpace the broader US market, and the stock trades at a P/E that is far below both peers and the wider energy services sector, which may appeal to investors who focus on valuation. At the same time, relatively low returns on equity, a funding mix reliant on external borrowing and a young, less independent board mean governance and balance sheet quality deserve close attention before drawing conclusions about its long term appeal.

HMH Holding sits at the crossroads of rising energy security spending and a P/E that looks disconnected from peers. The real question is whether that discount reflects hidden strength or something investors are missing, which starts to come into focus in the DCF valuation analysis for HMH Holding

Devon Energy (DVN)

Overview: Devon Energy is a US focused oil and gas producer that drills for oil, natural gas, and natural gas liquids across major shale basins such as the Delaware, Eagle Ford, Anadarko, Williston, and Powder River, selling production into domestic and export linked markets.

Operations: Devon Energy generates about US$16.0 billion in revenue from its oil and gas exploration and production business, all from the United States.

Market Cap: US$46.6 billion

Devon Energy sits at the center of the current oil price shock, with pure play exposure to US shale production at a time when Middle East tensions and tighter Iranian sanctions are pushing crude higher and lifting volatility. The company combines large scale exposure to the Delaware Basin and other key fields with a focus on free cash flow, a commitment to returning up to 70% of that cash to shareholders, and post merger midstream moves that aim to smooth price swings. However, investors still face real trade offs, including high decline shale wells, meaningful debt, governance growing pains, and earnings that recently declined despite long term growth forecasts. This raises the question of whether the current risk and reward profile is as straightforward as headline oil prices suggest.

Devon Energy’s free cash flow pitch and shale exposure can look straightforward, yet the real story sits in how its risk and reward stack up against peers in the 3 key rewards and 4 important warning signs (1 is major!)

Golar LNG (GLNG)

Overview: Golar LNG converts and operates ships as floating liquefied natural gas, or FLNG, facilities, giving energy producers a way to liquefy, store, and transport gas at sea without building large onshore plants.

Operations: Golar LNG generates about US$442.9 million of revenue from its first FLNG unit and about US$25.7 million from its Corporate and Other segment.

Market Cap: US$5.0b

Golar LNG sits squarely in the path of recent Middle East supply disruptions, with floating LNG units that can monetize stranded gas and respond to tight LNG markets when pipeline and onshore capacity are constrained. Long term FLNG contracts, a large contracted EBITDA backlog and recent earnings strength contribute to income visibility that many investors look for in volatile energy conditions. At the same time, commodity linked upside and discussions about securing additional units give the stock exposure to higher LNG pricing. On the other hand, the business relies heavily on a small number of large projects and uses meaningful external borrowing, and there are questions around cash flow coverage of debt and dividends. The key consideration for investors is whether the contracted revenues and FLNG growth pipeline are sufficient to offset those funding and execution risks.

Golar LNG’s contracted FLNG backlog and commodity linked upside suggest the headline story only scratches the surface, and the next phase of growth hinges on one factor hiding in the full narrative for Golar LNG

The three stocks covered here are just a starting point, and the full Energy Sector Stocks screener has surfaced 27 more companies with equally compelling stories across producers and oilfield services in the Energy Sector Stocks (Oil & Gas Producers, Oilfield Services) screener. Using Simply Wall St, you can quickly identify and analyze the specific catalysts and narratives that matter to you so you can focus on the opportunities with your highest conviction in this corner of the energy sector.

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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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