10 energy stocks to eye ahead of a challenging winter

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10 energy stocks to eye ahead of a challenging winter

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 10 energy stocks to eye ahead of a challenging winter
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Highlights 

  • Rising energy bills have contributed significantly towards the escalating cost of living crisis in the UK.
  • Ofgem has recently approved that the energy price cap would be revised quarterly, rather than biannually.
  • According to critics of the move, the quarterly revision would push more UK households towards fuel poverty in the middle of the upcoming winter.

Rising energy bills have been the biggest contributor towards the escalating cost of living crisis in the UK. The energy price cap, which was introduced by the UK’s energy regulator Ofgem in January 2019 to maintain the lid on prices, has been rising lately. Although the measure was supposed to be temporary, it is in place till date and will remain so, as the UK economy is struggling with new obstacles.

Rising energy demand

The demand for energy went up sharply after the pandemic-related restrictions were finally eased. Amid the already soaring energy demand, the escalation of the tragic Russia-Ukraine war led to energy shortage across the globe while creating supply chain bottlenecks.

Being a major gas producer, Russia has cut back on supplying to the European countries, and thus energy independence has become a major priority for energy dependent nations, like the UK itself. Other nations have also put sanctions on Russian oil and gas, which has led to a hike in energy prices globally.

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New update by Ofgem

Up till now, there used to be a biannual review of the energy price cap. However, on 4 August, Ofgem has approved that the energy price cap would be revised quarterly, rather than biannually, while alerting customers about a very rough upcoming winter season. The reason given by Ofgem behind this move is that it would be able to review the price cap and adjust it in the with the volatile market more swiftly while avoiding any price shocks.

After April’s hike that led to a surge in energy bills, the price cap is expected to go further up in October. Ofgem said in May that the average UK household may witness a hike of £800 in energy bills, taking it to £2,800 a year, but now it believes that the bills may go further up.

According to industry analysts Cornwall Insight, the energy bills of an average UK household is expected to be £3,358 per year from October, and then £3,615 per year from January, higher than its earlier estimation. The average annual bill stood at just £1,400 in October last year. The energy price cap isn’t applicable in Northern Ireland, but there also households have witnessed a hike in bills.

Since last year, over 30 energy suppliers in the UK have gone bust as they couldn’t forward the soaring costs to the consumers due to the price cap. With the new update, Ofgem believes that the more frequent updates in the price cap would prevent suppliers from failing and help them in predicting the customers’ energy needs in a better way.

Downside of the decision

Even though the quarterly revision of the energy price cap may help suppliers, but it may have a negative impact on the customers. According to critics of the move, the quarterly revision would push more UK households towards fuel poverty in the middle of winter, leading to higher burden on the NHS as it ultimately may lead to more winter deaths.

Raising the price cap quarterly instead of every six months would lead to quicker price hikes for consumers in line with the rising wholesale prices, but it would also mean that prices would fall more swiftly when they dip. Ofgem has received condemnation due to the timing of its decision, which would force consumers to pay more this autumn if the wholesale energy prices continue to stay elevated, as expected.

For people to stay warm in the near future, the Government must provide them with financial support, energy efficiency programs must be expanded, and cheaper renewable alternatives must be offered to them. Amid the rising energy bills, UK investors can keep on energy stocks offering decent returns. Kalkine Media® deep dives into the stocks currently doing well amidst the ongoing situation. 

EnQuest plc (LON: ENQ)

The shares of the independent British petroleum producer, EnQuest plc, plummeted by 1.41% at 1:13 PM (GMT+1) on Thursday and were trading at GBX 27.90. With a P/E ratio of 1.74, the company presently holds a market cap of £533.72m. EnQuest has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 49.19% and 15.65%, respectively. The company’s earnings per share are also positive, at 0.22.

Energean plc (LON: ENOG)

The shares of the global hydrocarbon producer, Energean plc, were trading at GBX 1,168.00 at 1:16 PM (GMT+1) on Thursday. The company presently holds a market cap of £2,079.51m and is a part of the FTSE 250 index. EnQuest has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 36.14% and 72.83%, respectively. However, the company’s earnings per share are negative, at -0.54.

Shell plc (LON: SHEL)

The shares of the oil and gas producing giant, Shell plc, surged by 0.83% at 1:27 PM (GMT+1) on Thursday and were trading at GBX 2,188.50. With a P/E ratio of 5.55, the company presently holds a market cap of £159,206.72m and is a part of the FTSE 100 index. Shell has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 34.85% and 46.57%, respectively. The company’s earnings per share are also positive, at 2.59.

Hunting plc (LON: HTG)

The shares of the oil & gas equipment & services supplier, Hunting plc, were trading at GBX 218.00 at 1:31 PM (GMT+1) on Thursday. The company presently holds a market cap of £359.57m. Hunting has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 28.84% and 1.87%, respectively. However, the company’s earnings per share are negative, at -0.53.

BP plc (LON: BP.)

The shares of the global oil supermajor, BP plc, surged by 2.36% at 1:34 PM (GMT+1) on Thursday and were trading at GBX 420.40. The company presently holds a market cap of £78,182.85m and is a part of the FTSE 100 index. BP has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 27.03% and 37.16%, respectively. The company’s earnings per share are also positive, at 0.38.

Diversified Energy Company plc (LON: DEC)

The shares of the US-based oil and gas firm, Diversified Energy Company plc, dipped by 1.29% at 1:57 PM (GMT+1) on Thursday and were trading at GBX 122.90. The company presently holds a market cap of £1,059.45m and is a part of the FTSE 250 index. Diversified Energy Company has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 17.73% and 17.06%, respectively. However, the company’s earnings per share are negative, at -0.03.

Capricorn Energy plc (LON: CNE)

The shares of the globally operating oil and gas extractor, Capricorn Energy plc, were trading at GBX 218.40 at 2:01 PM (GMT+1) on Thursday. With a P/E ratio of 1.59, the company presently holds a market cap of £688.12m and is a part of the FTSE 250 index. Capricorn Energy has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 15.99% and 67.48%, respectively. The company’s earnings per share are also positive, at 1.81.

Capital Limited (LON: CAPD)

The shares of the group extending services to the exploration and mining sectors, Capital Limited, plummeted by 1.69% at 2:04 PM (GMT+1) on Thursday and were trading at GBX 93.20. With a P/E ratio of 3.12, the company presently holds a market cap of £180.96m. Capital Limited has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 13.17% and 14.80%, respectively. The company’s earnings per share are also positive, at 0.18.

Tullow Oil plc (LON: TLW)

The shares of the Arica and South America focuses oil and gas explorer, Tullow Oil plc, rallied by 0.40% at 2:08 PM (GMT+1) on Thursday and were trading at GBX 50.40. The company presently holds a market cap of £722.09m and is a part of the FTSE 250 index. Tullow Oil has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 8.50% and 8.93%, respectively. However, the company’s earnings per share are negative, at -0.06.

Harbour Energy plc (LON: HBR)

The shares of the greatest North Sea operator of oil and gas, Harbour Energy plc, rallied by 2.83% at 2:12 PM (GMT+1) on Thursday and were trading at GBX 359.40. With a P/E ratio of 34.87, the company presently holds a market cap of £3,139.48m and is a part of the FTSE 250 index. Harbour Energy has provided positive returns to its shareholders as of 4 August on both YTD and annual basis, standing at 1.13% and 5.42%, respectively. The company’s earnings per share are also positive, at 0.12.

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