Investing £20,000 in Shell (LSE: SHEL) shares four years ago would have been a smart move.

In February 2021, the world was still reeling from the Covid pandemic. Stock markets were volatile, economies were buckling and the Shell share price was trading at just 1,345p. Fast forward to today, and the stock price has surged to 2,661p. That’s an impressive 98% rise over the period.

So how much would an investor who put £20,000 into Shell shares back then have today? Let’s crunch the numbers.

At 1,345p per share, they’d have acquired around 1,487 shares (I’m leaving trading costs out). At today’s price of 2,661p, those shares would now be worth around £39,578. That’s nearly double the original investment.

The compounding power of dividends

Capital growth’s only part of the story. Shell’s continued to reward shareholders with dividends. I’ve totted up everything it’s paid to UK investors since 29 March 2021. If my maths’ correct, it works out as £3.47 per share. With 1,487 shares, that amounts to an extra £5,160 in total cash returns.

Adding up both the capital appreciation and dividend income, the total value of the investment today would be around £43,738. That’s a whopping 119% total return over four years.

I’m cherry-picking that performance period. Others won’t have done as well. The key question now is whether Shell can maintain its momentum.

The company benefitted massively from the energy crisis triggered by Russia’s invasion of Ukraine in 2022. Soaring oil and gas prices boosted its revenues and profits. But with energy prices having settled, the stock’s performance has slowed. Over the past year, the shares are up just 9%.

The global energy transition’s a big challenge. Shell’s invested in renewables, but with mixed success. 

Just last week, it wrote down $1bn on its US wind business. CEO Wael Sawan’s made it clear that the company’s green energy division must start to deliver meaningful returns.

At a trailing price-to-earnings (P/E) ratio of 7.6, Shell shares don’t look expensive. That’s roughly half the average FTSE 100 P/E of around 15 times.

This suggests the market’s pricing in risk, possibly due to uncertainty over the future of fossil fuels. As ever, where energy prices go in the short term is anybody’s guess. Especially with the world bracing for a potential trade war.

Can it keep rewarding shareholders?

On the income front, the stock currently offers a trailing dividend yield of 4.1%. That’s attractive for investors seeking passive income, although it’s worth remembering dividends are never guaranteed.

In its Q4 results, released on 30 January, Shell announced a 4% dividend hike alongside a $3.5bn share buyback (its 13th consecutive quarterly buyback of $3bn or more). The forward yield’s 4.8%. That’s good, albeit below its average 10-year yield of 5.7%.

However, profits fell 16% to $16.1bn across 2024, raising concerns about whether these payouts can be sustained. Net debt grew by $3.6bn over the quarter, now standing at $38.8bn. However, that’s down from $43.5bn at the start of 2024.

Shell faces challenges but it seems further down the energy transition road than rival BP. Volatility’s baked in, but I think it’s worth considering by investors with the patience to withstand short-term share price volatility.

The post £20,000 invested in Shell shares 4 years ago is now worth… appeared first on The Motley Fool UK.

More reading

• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• Prediction: 12 months from now, £5,000 invested in Shell shares could be worth…
• The BP and Shell share price are being hammered today – what should investors do?
• The rocketing BP and Shell share prices leave investors facing a terrible choice
• Are investors taking a massive gamble with the Shell share price?

Harvey Jones has positions in Bp P.l.c. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Shares in FTSE 250 oil and gas company Ithaca Energy (LSE:ITH) are down 30% in the last 12 months. I’m intrigued. I see potential here for one of the biggest oil and gas opportunities of the last two decades.

I’m going to investigate in detail and with a critical eye. So let’s get into it.

Laughing all the way to the Rosebank

First things first. Ithaca Energy went public in November 2022 to exploit its acquisition of a 20% stake in Rosebank. This is one of the UK’s largest untapped oil fields. It’s located in the North Sea, 80 miles off the coast of the Shetland Islands.

If the name rings a bell, there’s a good reason.

Rishi Sunak’s Tory government gave Rosebank the long-awaited green light in September 2023. This approval came with some pretty massive public and media attention.

Rosebank was discovered in 2004. It’s only now, almost 20 years later, that work can begin.

That’s the type of risk and reward inherent in oil and gas discoveries.

What comes next

Ithaca Energy has a 20% non-operated stake in the Rosebank oil field. Non-operated means the company won’t do any of the drilling here.

The firm doing the work will be Equinor, which owns the other 80% stake. That’s Norway’s state-owned multinational oil and gas company. It’s worth around £79bn and has been operating since 1972.

With that kind of hard-won track record, it’s reasonable to assume it will be a useful partner.

Phase 1 drilling is slated to begin in 2026-27. So it will be at least five years before Ithaca starts to see the value of Rosebank come good.

It’s tough to say how much Rosebank may be worth to Ithaca. But a 20% stake is undeniably more valuable now the field can be drilled.

And the average dividend yield for FTSE 250 companies is around 4.7%. So a company paying three times that level may seem like a no-brainer.

Risk and reward

It’s always worth paying extra attention to the risks of investing in smaller UK companies.

That’s especially true when considering home-grown commodities or oil and gas stocks.

British investors have certainly been burned in the past. Some of us may recall the whole Sirius Minerals debacle. That was a UK-based fertiliser company that promised the earth but ended up crashing out of the FTSE 250, taking investor cash with it.

The comparison isn’t entirely fair though. Ithaca isn’t solely reliant on a project that’s not yet built. But my capital isn’t unlimited, so I must cast a critical eye over every opportunity.

Buy or pass?

Ithaca pulled in sales from its operated oil fields of £2.1bn last year. And £143m in cash on the balance sheet calms my nerves somewhat. Also, the company has halved its debt pile in the last two years. That suggests prudent management.

The company’s free cash flow is 10 times what it was in 2018. This indicates there’s material growth here.

And while revenue is forecast to dip slightly, analysts expect profits to rise from £372m this year to £396m in 2024.

I’m considering taking a position here, with the share price stabilised at around 155p.

The post This FTSE 250 stock pays 17% dividends! Is Ithaca Energy my next big buy? appeared first on The Motley Fool UK.

More reading

• Is the 8.7% yield on this FTSE 250 stock too good to be true?

Tom Rodgers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

What a year it has been for the BP (LSE: BP) share price. Year-to-date, the stock is up 45%. It’s all a far cry away from a couple of years ago when the oil price turned negative and it was sitting on heavy losses. As an existing shareholder, it has been one of my best performing shares. However, as recession fears grow, is the party about to come to a spectacular end?

Surging free cash flows

When it comes to cash flows, oil stocks are in a class of their own. In their Q3 results released today, BP reported surplus cash flow of $3.5bn. For the first nine months of the year, it reached $14.2bn. This is over 300% higher than the same period last year.

Underlying profit was $8.2bn, slightly down on the record figure last quarter. This reflected lower oil prices, which averaged $101 for the quarter.

BP continues to use a significant portion of these profits to bring down its net debt. I believe this is a very prudent strategy as it reduces interest expense at a time when interest rates are rising.

Shareholder returns

One of the primary reasons why I invest in BP is for passive income. Last quarter it raised its dividend per share by 10% to 6.006 cents. Although it didn’t raise it this quarter, the dividend yield is still a respectable 4.2%.

The company remains committed to allocating 60% of free cash flow to share buybacks. Over the next three months it intends to buy back another $2.5bn of its own shares. So far this year it has announced buybacks of $8.5bn. With a smaller issued share capital, existing shareholders will end up owning a larger proportion of the company.

BP is undervalued

Despite its significant share price appreciation, I still believe that BP shares offer tremendous long-term value.

Clearly, BP does face some short-term headwinds. There is increased uncertainty about how demand for oil will hold up should the economy go into recession. Demand is also being affected by ongoing lockdowns in China.

However, what makes me extremely confident about BP over the longer term are underlying structural factors related to the supply of oil.

In the decade leading up to the global financial crisis, oil prices rose to $150. In response, more and more demand came online. Today, the macro set-up is totally different.

Since the shale boom of 2014, the oil industry has suffered from a severe lack of underinvestment. Several factors are likely to ensure that this remains the case for several years.

First, increasing calls for windfall taxes makes oil companies nervous about investing. Second, as interest rates rise in a bid to cool inflation it becomes a double-edge sword. Yes, it reduces demand; but the increase cost of capital hits exploration budgets. In response, oil companies cut back on much-needed long-term investment.

There is no magic bullet for solving the energy crisis. Until structural forces holding down supply are resolved, the medium-term outlook, in my view, remain rosy for BP. That is why I continue to add shares to my portfolio on a regular basis.

The post At a year high, can the BP share price keep rising? appeared first on The Motley Fool UK.

More reading

• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• At 570p, is it too late to consider buying BP shares?
• £20,000 invested in BP shares 1 year ago is now worth…
• As the FTSE 100 dips again, here’s what I think smart investors do next
• Forecast: in 12 months, a £5,000 investment in BP shares could be worth…

Andrew Mackie has positions in BP. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

In 2022, oil and gas stocks have been far and away the standout performers in the FTSE 100. Year-to-date, the Shell (LSE: Shel) share price is up 47%. However, investors still remain wary about buying into Big Oil. Here I’ll explain why I believe that Shell, and the broader industry, will continue to outperform the general market in the years ahead.

Gushing free cash flow

In its Q3 results released today, Shell reported earnings of $9.5bn. That’s over double what it reported in the same period last year. EBITDA (earnings before income tax, depreciation and amortisation) was 60% higher, standing at $21.5bn.

Despite these impressive figures, they’re down slightly on Q2 as oil prices have come off their highs of $120, reached earlier in the year.

Growing dividends and buybacks

One of the primary reasons for investing in Shell is for its dividend. When the pandemic struck, it shocked the market by reducing it by 66%. It’s now seeking to woo investors back by steadily increasing dividends.

In Q3, it announced a dividend per share (DPS) of 25 cents, unchanged from last quarter. In Q4, however, DPS is earmarked to rise 15%. If that dividend were maintained, my calculations are that the stock would provide a yield of 4.2%.

Admittedly, Shell’s dividend yield is hardly headline-grabbing. However, the company continues to buy back its own stock at an increasing rate.

Throughout 2022, it’s expecting to buy back $18.5bn of its own shares. Over the next quarter alone, it has earmarked buybacks totalling $4bn. As a result, total distributions to shareholders will be in excess of 30% of cash flow from operations (CFFO). Given that at the nine-month mark, CFFO stands at $46bn, shareholders are been handsomely rewarded.

Commodities bull market

Over the last year, I’ve written extensively about the oil and gas industry. While many investors have given the sector a wide berth, wary about its medium-term prospects, I continue to remain bullish.

Back in June when oil stocks began selling off, I was in favour of taking a contrarian stance. Since then, the commodities sector has bounced back strongly. So where do I go from here?

Since reaching a peak of $120 in June, the oil price has slowly been declining. However, this decline needs to be set in a wider context.

In a bid to increase supply, the US government has been selling off its strategic petroleum reserves (SPR) at a record rate over the past year. At this rate, the SPR will be zero in 18 months.

Elevated levels of inflation are forcing central banks to push up interest rates. As the world economy heads into a likely deep recession, demand will undoubtedly take a hammering.

Yet despite these two huge macro forces bearing down on it, the oil price continues to hold up well. The reason is that inventories remain extremely tight. It’s the lack of supply coming online in the years ahead that’s the real driver for oil prices to remain elevated.

Levels of capital expenditure across the industry remain depressed. Solving this issue will involve international consensus around energy security. Until addressed, I expect the Shell share price to continue to perform well. That’s why I recently increased my position in Shell.

The post Are we entering a golden era for the Shell share price? appeared first on The Motley Fool UK.

More reading

• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• Prediction: 12 months from now, £5,000 invested in Shell shares could be worth…
• The BP and Shell share price are being hammered today – what should investors do?
• The rocketing BP and Shell share prices leave investors facing a terrible choice
• Are investors taking a massive gamble with the Shell share price?

Andrew Mackie has positions in Shell plc. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

So far this year, oil stocks have been the standout performers in both the S&P 500 and FTSE 100. By contrast, the darlings of the stock market over the past 10 years, the FAANGs — Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet), are all down. But with the long-term viability of the oil industry in doubt, are the days of Big Oil numbered?

2022 – the year of Big Oil

Recently published research by CMC Markets, highlights the huge chasm that has opened up between oil stocks and the rest of the stock market. This is summed up perfectly in the following table:

Occidental Petroleum has been the standout performer in the S&P 500 in 2022. Soaring oil prices have turned the company into a cash generating machine. Its extraordinary gains could have been helped by the Warren Buffett effect. Berkshire Hathaway owns 7m of its shares.

In the UK, both Shell and BP shareholders have profited handsomely from rising commodity prices. This includes Glencore, whose main source of revenue is coal.

The performance of such stocks is in complete contrast to the technology sector. In 2021, it was the unprofitable tech companies that first began to falter. Now, in 2022, the contagion is spreading to the mega-cap growth stocks. Investors are waking up to the reality that fundamentals do matter after all.

The bull case for oil

History demonstrates that as oil hovers around the $90-$100 range, investment should be flowing into the sector. After all, that’s what happened during the shale boom of 2014, when oil hit $100. A similar picture emerged in the run up to the global financial crisis, when it hit $150.

Today, as a percentage of GDP, capex investment in the commodities sector is at a near 20-year low. The predominant reason for this underinvestment, I believe, is the rise of the environment, sustainability and governance (ESG) agenda.

Yet significant tailwinds for commodities means that oil is likely to be in high demand during the next decade. For example, the pandemic and increasing geopolitical tensions have put significant strain on supply chains. Many companies are actively moving their manufacturing operations away from China. In such a scenario, commercial construction in the US and UK markets could boom.

The bear case

The case against oil fundamentally rests on it being a dying industry. As the world reduces its reliance on hydrocarbons, the industry could be left with stranded assets. But the fundamental unknown is the time frame over which this will happen.

The pandemic brought to the fore problems that, in my opinion, had been there for some time. For the last 15 years, human and capital investment has flowed into the tech sector. However, the rise of inflation changes everything.

During periods of high inflation, history shows that commodities do well. Rising interest rates will eventually reduce demand. But until the supply side is dealt with, I see oil stocks continuing to outperform the general market. That’s why, on any dips, I continue to add to my commodities stocks.

The post The unstoppable rise of Big Oil, or a bubble primed to burst? appeared first on The Motley Fool UK.

More reading

• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?
• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• I asked ChatGPT if I should buy Aviva, Diageo or BAE Systems stock and it said…
• SpaceX’s IPO threatens to leave the Tesla share price on the forecourt

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Andrew Mackie has positions in Glencore, BP and Shell plc. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If I was building a Stocks & Shares ISA portfolio from scratch, I would start my search on the FTSE 100. The UK’s blue-chip index contains a broad range of stocks that offer the capital growth and dividend income I’d need to build my wealth over time.

The FTSE 100 fell out of fashion during the bull market, when investors favoured whizzy US tech stocks, but is showing its mettle in this difficult year. It has been boosted by the relative success of the energy and mining sectors. The banking, insurance, utility, and healthcare sectors have also shown their value in a crisis.

My Stocks and Shares ISA dream team

I would build my dream portfolio on a bedrock of solid income stocks. As inflation rises, a regular stream of dividends would help protect the value of my fledgling portfolio in real terms. Investing in stocks lower down the risk scale might also save me from an early, dispiriting setback.

First, I would buy something really solid, like utility National Grid. This stock isn’t entirely without risk (none is). Its earnings are regulated and could get squeezed as anger over energy privatisation continues. Yet it has offered a solid income for years, and yields 4.75% today.

I would then add a stock from another solid dividend sector, in this case, financial services. Insurer Legal & General Group has the double attraction of a low valuation (7.67 times earnings) and high income (6.95%). It also recently posted an 8% increase in operating profits to £1.1bn, boosted by higher interest rates and its growing portfolio of annuities.

The L&G share price has looked cheap for years so I am not expecting a sudden re-rating. Yet the low valuation may offer some downside protection. I will complement it by investing in spirits giant Diageo. This company confirmed its reputation as a solid defensive stock, recently posting a 21% increase in full-year sales to £15.5bn.

The Diageo share price isn’t cheap, trading at 25 times earnings, but then it never is. The dividend looks low at 1.99%, but that’s usually the case, too. The company’s dividend policy is progressive and the stock has offered strong returns through thick and thin.

I like high yields at low prices

It’s hard to resist the energy sector this year and my start-from-scratch portfolio would include oil giant BP. The yield is lower than it used to be at 3.5% but the valuation looks promising at 13.94 times earnings.

BP has a tough job ahead making the transition to renewables. Yet as we have seen lately, the oil age is not dead yet. I would complete the groundwork for my dream portfolio by investing in the banking sector, picking out Lloyds Banking Group.

It looks dirt cheap trading at just 6.13 times earnings. The 4.27% yield is forecast to climb steadily to 5.5% next year. Like L&G, shares in Lloyds seem to be perennially undervalued. I hope to be holding it when the market finally wakes up to its worth.

The post This is what my Stocks & Shares Isa starter portfolio would look like appeared first on The Motley Fool UK.

More reading

• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?
• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• I asked ChatGPT if I should buy Aviva, Diageo or BAE Systems stock and it said…
• SpaceX’s IPO threatens to leave the Tesla share price on the forecourt

Harvey Jones doesn’t hold any of the shares mentioned in this article. The Motley Fool UK has recommended Diageo and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

2022 has been characterised by red hot inflation, rising interest rates, and falling markets. The world’s largest index, the S&P 500, has fallen 14% year to date. But before it rebounded in July, the shares reached a low of $3,636, marking a 23% year-to-date loss. Over the course of a year, the index has fallen 8%. Across the pond the situation isn’t nearly as bad, with the FTSE 100 down 0.01% for the year. But this still highlights its stagnant returns.

However, since July, things seemed to have been picking up. So, is now the right time to be investing in the stock market? Or should I be searching for safer ways to grow my capital? Let’s take a look.

The year so far

As mentioned, the reason markets have been suffering is tied to the macro economy. Inflation has been reaching record figures in the last few months, caused by a combination of supply bottlenecks, Covid-19 government intervention, and the Russia-Ukraine crisis. In July in the US, inflation reached 8.7%, and in the UK, it reached 10.1%.

The way that central banks are controlling this sky-high inflation is by raising interest rates. Both the UK and US have hiked their rates. When rates rise, people are more likely to keep hold of their money, as they can earn a higher risk-free rate. This deters them from buying speculative assets like stocks, and stock market valuations usually take a hit.

One of the main reasons that markets have rebounded since July, is the news that US month-on-month inflation fell between June and July. This signified that inflation was coming under control and seems to have restored investor confidence in markets and the wider economy.

However, things are far from plain sailing. Energy prices are still soaring, which is keeping inflation high, and putting pressure on businesses around the world. What’s more, Citi recently announced a forecast of 18% inflation in the UK by January. It also highlighted it expected an interest rate of between six and seven percent to be enforced to control this. If these figures are correct, the UK economy could plunge into recession.

Is now the time to invest?

The good news about the stock market is that there are shares that perform well during recessions and times of economic turmoil. ‘Defensive’ industries like supermarkets, telecoms, and high-dividend stocks are usually a good play, but still carry heightened risk.

As for myself, I’m on the lookout for bargain companies with established reputations. Stocks that are beaten down by negative market sentiment, but still have solid underlying fundamentals. Anything other than such stocks I’m going to steer well clear of. Although the markets have seen a slight rebound, there’s no telling how inflation and interest rates will develop over the remainder of this year. However, I still think that investing in stock is my best bet at building long-term wealth, and as such I will still be investing during this turbulent period.

The post Have we seen the worst of the 2022 stock market crash? appeared first on The Motley Fool UK.

More reading

• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?
• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• I asked ChatGPT if I should buy Aviva, Diageo or BAE Systems stock and it said…
• SpaceX’s IPO threatens to leave the Tesla share price on the forecourt

Citigroup is an advertising partner of The Ascent, a Motley Fool company. Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

When a small-cap like Hurricane Energy (LSE:HUR) experiences a major share price hike, I’m intrigued and want to learn more. At current levels, is the Hurricane Energy price an opportunity I should consider for my holdings? Let’s take a closer look.

Hurricane Energy share price soars

As a quick reminder, Hurricane is an oil and gas exploration business. It focuses on making discoveries in naturally fractured basement reservoirs. These are usually prolific producers of oil and gas globally, however, they are a new play on the UK Continental Shelf, which is the region of waters surrounding the UK.

So what’s the current state of play with Hurricane Energy shares? Well, as I write, they’re trading for 8p. At this time last year, the stock was trading for just 2p, which equates to a return of 300%!

So why has the Hurricane Energy price soared? I believe the current market for oil, coupled with the company’s impressive performance in recent times has definitely boosted shares. In July, Hurricane repaid an outstanding convertible bond worth £78.5m, which made the firm debt-free. This is a rare occurrence for small oil and gas firms like Hurricane to be totally debt-free. Furthermore, as of 31 July, it had $89m worth of net cash on the books.

The investment case

The recent oil and gas markets have been kind to many businesses in the industry, and this includes Hurricane Energy. As part of the operational update it provided earlier this month, all signs pointed towards 2021 being a transformative year for the business.

Hurricane reported that, due to stable oil prices and rising demand, it managed to generate $135.7m of free cash flow. This helped to post a profit of $18.2m after tax. This is a major turnaround when comparing figures to the previous year when Hurricane posted a mammoth loss of $625.3m.

It is worth noting that despite a bullish oil market, macroeconomic factors are playing their part. Soaring inflation, and the rising cost of materials, has had an impact on costs for Hurricane. Despite the impressive figures noted above, costs to produce a barrel of oil did increase to $28.20 this year. These issues could affect profitability moving forward.

What I’m doing now

Things look good right now for Hurricane Energy. The results I’ve noted above have boosted the Hurricane Energy share price in recent months. Existing shareholders could be in for a lucrative year ahead if this upward momentum continues.

After taking everything into account, I’ve decided I would be willing to open a small position in Hurricane shares. They look decent value for money on a price-to-earnings ratio of just eight. Furthermore, at 8p per share, the risk to reward ratio looks very low for me.

If Hurricane shares were to struggle, I wouldn’t have lost much money based on current levels and my investment. A big part of my investment strategy is to look for small-cap stocks doing well that could turn into major players in the long term. I wouldn’t be surprised to see the Hurricane Energy share price continue on an upward trajectory, at least in the short term.

The post Up 300%, is the Hurricane Energy share price an opportunity too good to miss? appeared first on The Motley Fool UK.

More reading

• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?
• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• I asked ChatGPT if I should buy Aviva, Diageo or BAE Systems stock and it said…
• SpaceX’s IPO threatens to leave the Tesla share price on the forecourt

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

I believe there are a number of quality UK shares trading at dirt-cheap levels that could boost my holdings. One stock I am considering adding is Petrofac (LSE:PFC). Let’s take a look at some pros and cons of me buying shares to help me decide.

Oil and gas infrastructure

As a quick reminder, Petrofac provides oil and gas infrastructure services throughout the world. These services include construction, maintenance, and support services to energy and oil businesses.

So what’s happening with Petrofac shares currently? Well, as I write, they’re trading for 116p. At this time last year, the stock was trading for 100p, which is a 16% return over a 12-month period.

To buy or not to buy

So what are the pros and cons of me buying Petrofac shares?

FOR: Petrofac has a vast profile and presence. It is truly a globally diversified business and has contracts throughout the world. This is important as it can leverage this to boost performance and returns. It recently secured a lucrative contract worth over $1.65bn with the Abu Dhabi National Oil Company. Furthermore, it managed to secure over $2bn worth of orders in 2021 overall, which was a significant increase compared to the previous year. It has continued this momentum in 2022, with a few noteworthy contract wins, including a $100m deal with Cairn Energy.

AGAINST: Petrofac was involved in a fraud and bribery scandal a couple of years ago. These types of scandals affect investor sentiment badly. In the end, the business was fined £77m and a senior employee pleaded guilty to bribery charges. Sometimes, these types of issues have a negative effect on investor sentiment and can also affect future business negatively too.

FOR: I learned that Petrofac has decided to join the renewable energy market. It recently signed a memorandum of understanding with Ocean Seawind Technology for a contract maintaining wind turbines in the Mediterranean Sea. It recently announced its “new energy team”, created to focus on the renewable energy sector. With this development, the ability to explore cleaner energy solutions could provide Petrofac with exciting new opportunities that could boost performance and returns longer term.

AGAINST: I understand that the oil and energy market is volatile. As economic headwinds continue throughout developed countries, demand could be affected. In turn, demand for Petrofac’s services could also be affected. I will keep a close eye on developments here.

A UK share I would buy

I would be willing to open a small position in Petrofac shares. The essential nature of the business, and the fact that oil and energy is pretty much a global staple, help me make my decision.

Furthermore, Petrofac shares look decent value for money to me on a price-to-earnings ratio of just 10 at current levels. Oil and energy can be a volatile yet lucrative market, so I will keep a close eye on developments, especially with continuing macroeconomic headwinds to take into account. This is why I would only buy a small number of shares to start with.

The post UK shares: should I buy this oil and gas infrastructure stock? appeared first on The Motley Fool UK.

More reading

• £10,000 invested in easyJet shares at the start of 2026 is now worth…
• 5 years ago, £5,000 bought 2,645 Barclays shares. But how many would it buy now?
• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• I asked ChatGPT if I should buy Aviva, Diageo or BAE Systems stock and it said…
• SpaceX’s IPO threatens to leave the Tesla share price on the forecourt

Jabran Khan has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The BP (LSE:BP) share price has already risen 40% in the last 12 months. This is a dramatic outperformance of the 4.7% increase that the FTSE 100 has seen in the same period. Rising energy prices have boosted the company’s profit margins and made it one of 2022’s top-performing shares.

Tuesday gave BP shares something more to cheer about as the energy giant released its highest quarterly results for 14 years. Does this put the BP share price in a good place to continue its strong performance?

Strong second-quarter results

BP announced underlying earnings of $8.5bn in the second quarter of 2022 — a 200% increase from the $2.8bn reported for 2021’s Q2. The group thanked strong refining margins and exceptional oil trading performance for the strong set of figures. 

Alongside the soaring earnings, it announced some other positive news. The company was able to reduce net debt for the ninth successive quarter to $22.8bn. It was also able to complete its $2.5bn share buyback programme in the period. The BP share price was up just under 3% on the back of Tuesday’s earnings.

The results came after a record-breaking week of earnings for large oil and gas companies. Shell announced its biggest-ever profit of $11.5bn while Chevron and ExxonMobil also reported soaring earnings. All three share prices rose on the news last week. 

Possible higher taxes

The incredible growth in earnings in the energy sector may lead to future challenges. Governments may be encouraged to raise taxes on the sector to help fund aid for people in the cost-of-living crisis.

The UK has already announced a windfall tax of 25% on oil and gas companies operating in the North Sea. BP announced that this has dramatically increased its tax bill in the UK this year. If a similar tax was to be introduced in other countries, future profits would be considerably dented. This is something I would have to keep an eye on if I took a position in BP.

The shift towards renewables

BP has been aiming to safeguard its future in a greener economy through a series of renewable energy investments. It recently announced a 40% stake in an Australian renewables project where it hopes to develop 26GW of solar and wind power. The company has also sold its stake in a Canadian oil sand project, which is notorious for high levels of pollution.

This shift towards renewable energy is vital if the BP share price wants to see strong performance for decades to come. However, the group will be cautious not to shift away from currently higher profitable hydrocarbons too quickly.

Overall, I believe that BP shares are positioned fairly well for the next couple of years. Fuel prices are remaining high and the company has made encouraging debt reductions and share buybacks. While possible tax rises would harm profits, I believe the BP share price will continue to see steady growth. As a result, I’d be adding BP shares to my portfolio were it not for the fact that I’m trying to reduce my exposure to carbon-intensive industries.

The post Will the BP share price continue to soar after strong Q2 earnings? appeared first on The Motley Fool UK.

More reading

• 5 years ago, £5,000 bought 354 Shell shares. But how many would it buy now?
• At 570p, is it too late to consider buying BP shares?
• £20,000 invested in BP shares 1 year ago is now worth…
• As the FTSE 100 dips again, here’s what I think smart investors do next
• Forecast: in 12 months, a £5,000 investment in BP shares could be worth…

Finlay Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.