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Energy ETFs Surge On Higher Commodity Prices

Related IVE Top 10 U.S. Large & All Cap Sector ETFs Economics, Earnings and Europe

The energy sector has been trading sharply higher, as rising oil and natural gas prices create a sturdy tailwind for many of these integrated service and exploration companies. 

After a frightening dip in January, that tested the 200-day moving average, the Energy Select Sector SPDR (NYSE: XLE) has rocketed to new all-time highs.  In fact, XLE has now gained over four percent in the month of April and more than 13 percent since its February low. 

This ETF is the largest and most heavily traded large-cap energy index, which encapsulates 44 companies and over $10 billion in total assets. 

Related: Uranium ETFs Are Coming On Strong

Many experts discounted the potential for the energy sector coming into 2014, as skepticism about the future of commodity prices weighed on revenue growth prospects. 

However, since the beginning of the year, the United States Oil Fund (NYSE: USO) has gained 6.12 percent and the United States Natural Gas Fund (NYSE: UNG) has jumped nearly 26 percent.  Weather-related factors have played a big role in the first quarter surge for natural gas this year. 

In addition, this sector has likely benefited from the rotation out of high-beta growth stocks and into value-oriented segments that are more defensive in nature.  The energy sector is the second largest allocation in the iShares S&P 500 Value ETF (NYSE: IVE), with more than 15 percent of the underlying holdings. 

Moving forward, first quarter company earnings announcements are going to be a key driver of price appreciation in this sector. 

Schlumberger Ltd (NYSE: SLB) recently reported a record first quarter profit, as demand for its advanced energy exploration technology continues to grow.

SLB represents more than 20 percent of the MarketVectors Oil Services ETF (NYSE: OIH) and is also a top component in XLE as well. 

There are a number of different ETF alternatives to play the energy sector, depending on your preference of large integrated oil companies, master limited partnerships, or smaller equipment and exploration names. 

In addition, you have the option to invest directly in crude oil or natural gas prices if you believe their upward momentum will continue. 

This diversification and flexibility make ETFs an excellent choice for those seeking exposure to the energy theme.

Posted-In: energy energy ETFs Energy Sector Natural Gas OilSector ETFs Commodities Global Markets Trading Ideas ETFs Best of Benzinga

© 2014 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

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Why Is Soros Long Halliburton?

Among George Soros’ new investments I found Halliburton (HAL) and it’s not tough to guess why the billionaire investor decided to go long on the company’s shares. Halliburton is a serial out-performer and has a history of beating its self-imposed tough targets. Even when the company is up by almost 46% year-to-date, it might still make sense to own the shares if you are a longterm oriented investor. You will not receive a great dividend from this company – its cash dividend yield is just 1.2% – but you should get great growth in the coming few years.

Halliburton’s Ambitious 2016 Goals

After beating its 2010 to 2013 goals this year, Halliburton has set for itself another stream of ambitious, although still reachable, goals for 2016. Halliburton aims to meet four key objectives. First, the company wants to grow its deep water business at a faster rate than its competitors without lowering margins. Hence, the company would be gaining market share without affecting its return profile in a high-growth market.

Secondly, Halliburton says that it can grow its works on mature fields by as much as 300% by 2016. The company wants to make its mature fields segment a $9 billion a year business which looks achievable as most companies are suffering from a growing proportion of fields in decline – for example, Royal Dutch Shell (RDS.A) has 72.7% of its fields in decline.

Thirdly, Halliburton wants to keep its leadership in unconventionals through its new geo-science platform, CYPHER. Last but not least, the company wants to increase its returns on capital employed to 20% from the current 11%.

Halliburton is pointing its cannons towards the right places. Mature fields, unconventionals and deep water are poised to keep growing fast within the U.S. and internationally. Moreover, the short term also looks compelling for the company as Halliburton offers great leverage to the improving North American drilling market. W ith the seasonal recovery in U.S. rig count beginning, margi! ns should improve. On top of this, the steady offshore rig count growth in the Gulf of Mexico should also benefit Halliburton in the coming few quarters.

Valuation Looks Fair

Halliburton now trades at 11.7 times 2014 earnings and 5.9 times EV/EBITDA. One of its closer competitors in the oil and gas services industry, Schlumberger (SLB) sells for 15.1 times 2014 earnings and 8.6 EV/EBITDA. Its true that Halliburton’s third quarter did not impress investors at all. As a matter of fact, the stock reacted negatively when results were released despite the small EPS beat the company achieved – $0.83 versus $0.82 analysts were expecting. The stock’s reaction was related to lower than expected growth (above all in Latin America) and smaller than expected margins in North America. That said, I believe those issues – slower growth and declining margins – were given by temporary issues such as the flooding in Colorado which is not an operational issue but a weather-re lated issue. Once again, I agree with Soros. Halliburton should continue outperfoming and beating its self-imposed targets.

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Oil Stocks BP & OXY Lead The Way This Earnings Season

oil stocks bp stock oxyWe’re in the thick of earnings season for the energy sector and BP (BP) and Occidental Petroleum (OXY) were the latest oil stocks to report earnings.

And both oil stocks did so with gusto.

On the backs of higher production and prices per barrel, the oil stocks showed why the majors are in a league of their own. And more importantly for BP and OXY specifically, the earnings show just how far the duo are into their respective transformations

For OXY and BP stock investors, the earnings reports for both oil stocks could be a precursor to greater things down the road.

BP Stock Sweetens Its Dividend

For beaten-down and beleaguered BP stock, the latest earnings report could be a sign of more positive things from one of the most well-known oil stocks. Ultimately, BP showed a 34% decrease in net profits vs. a year ago. But while at first blush that may seem bad, the truth is that number isn’t as terrible as it may seem.

The key for the oil stock is that BP managed to beat analysts’ projections by a wide margin.

British Petroleum reported third-quarter adjusted earnings of $1.17 per share on a replacement cost basis, excluding non-operating items. The oil stock’s results surpassed the analyst consensus estimates of just 97 cents. Much of that increase was due to higher average price of oil throughout the quarter.

BP sold oil for an average of $100.66 per barrel and natural gas for $5.01 per thousand cubic feet for the quarter. That’s versus $99 and $4.77, respectively for the previous quarter. Overall price realization rose 3.5% to $62.80 per barrel of oil equivalent. On the whole, the oil stock saw an 1.3% increase in profits from its upstream, as production at BP for the third quarter was 3.17 million barrels of oil equivalents a day.

These profits and gains managed to outweigh issues at its refining sector, which posted lower margins. BP was also encouraged by its progress on the production front and legal battle resulting from its Deep Horizon rig disaster/oil spill.

That prompted BP to raise its quarterly dividend by 5.6% to 57 cents a share. That gives BP stock a forward yield of just under 5%.

OXY Sees U.S. Production Growth

Like BP, oil stock rival Occidental Petroleum succeeded on the earnings front, built on the back of higher production and oil prices.

Gains for OXY came from higher oil production in the U.S. production, which was the equivalent of 476,000 barrels of oil per day. That was up about 7,000 barrels per day for the year ago quarter as well as also higher than the previous quarter’s production. That increase here at home helped offset lower production in the Middle East and North Africa — traditionally the bread-n-butter for OXY. Total production for the oil stock was 767,000 barrels per day.

The fourth largest U.S. oil stock OXY also saw higher prices for that higher production.

Beating BP on average cost per barrel, Occidental was paid $103.95 per barrel for crude. That’s a jump of nearly 8% versus last year’s numbers. OXY also saw a 32% gain in its average selling price for more for natural gas.

Adding in OXY’s 22% reduction in drilling costs and the oil stock produced a third-quarter profit of $1.58 billion — 15% more than a year ago. Adjusted profits per share came in at $1.96. That beat analyst estimates for the oil stock by roughly 6 cents. Meanwhile, OXY revenue rose 8% to $6.45 billion, also beating analysts’ projections.

While Occidental didn’t reward shareholders with a dividend increase, OXY stock has rallied this year about 27% based on the oil stock’s improving condition.

These Oil Stocks Set The Pace

Given that both BP and OXY reported better numbers based on higher average energy prices, odds are the rest of the oil stocks will do the same. That could make the overall sector a big buy in the weeks ahead.

For investors, oil stocks are certainly shining this earnings season. OXY and BP, as well previous reports by Schlumberger (SLB) and Halliburton (HAL), are proving that fact.

As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.