Why shares of Chevron, Halliburton and Antero Resources surged in March and continue to rally


What happened

Despite baffling market volatility in March, some oil and gas stocks posted strong gains. This includes the big names that often don’t grow that much in such a short time, such as Chevron (NYSE: CVX), Halliburton (NYSE:HAL)and Antero Resources (NYSE:AR). These three stocks jumped 13.1%, 12.9% and 33.1% respectively in March, according to data from S&P Global Market Intelligence.

Oil and gas prices were primarily driving the rally, but there were also company-specific tailwinds for some of these stocks that contributed to their momentum.

HAL data by YCharts.

So what

Perhaps one of the most significant repercussions of the Russian-Ukrainian conflict has been felt around the world commodity markets. Commodity prices – whether in the agriculture, metals or energy sectors – have exploded in recent weeks.

With oil and gas prices surging in early March, stocks across the sector also soared. Between Feb. 28 and March 8 alone, the price of West Texas Intermediate (WTI) crude jumped nearly 30% on geopolitical concerns, particularly after President Joe Biden announced plans to ban imports of Russian petroleum and liquefied natural gas and signed an executive decree on March 8. WTI is the main benchmark oil price in the United States

Although oil prices have since lost some gains, the latest developments could push prices higher again. On April 7, Congress passed a bill banning oil and gas imports from Russia, and all that remains is for Biden to sign it.

A person pointing at price charts on a screen with oil rigs in the background.

Image source: Getty Images.

Natural gas prices, meanwhile, hit 13-year highs just yesterday, so you can expect stocks like Antero Resources to rally even more as natural gas prices could generate massive cash flow for the company. Just this morning Mizuho Analyst Vincent Lovaglio raised Antero’s price target to $56 from $28, based on rising natural gas prices.

Halliburton also received a price target upgrade from $32 to $42 from Stifel this morning. The oil services company’s fourth quarter numbers beat estimates, and Halliburton also announced a dividend increase.

Chevron, meanwhile, received a big price upgrade earlier this week from UBS analyst Luiz Carvalho, who raised the oil giant’s price target to $192 from $150.

Chevron impressed the market on the first day of March by hosting its annual Investor Day. The company said it expects to generate more cash for shareholders whether oil is at $60 a barrel or $100 because it is much more “capital and profitable.”

The company also increased its share buyback program to a range of $5 billion to $10 billion per year, from $3 billion to $5 billion, and said it expects cash flow per share revenue increases at a compound annual rate of 10% over the next five years. This should also boost dividend growth; Chevron’s dividend per share has more than doubled since 2010.

Now what

While it’s hard to predict where oil and gas prices will head next, any sanctions on Russia could send prices soaring again.

Investor interest in stocks like Chevron, however, could remain high anyway given the company’s strong cash flow and dividend profile. Speculation is also ripe that Chevron could get an extension to its special license to operate in Venezuela. The United States currently has sanctions on Venezuelan oil, and Chevron has only minimal operations in the country.

An extension of its license or an easing of sanctions, as it is assumed, should be a big win for Chevron as it will help it to significantly increase oil production at a time when global supply is already disrupted due to the ongoing war between Russia and Ukraine.

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Neha Chamaria has no position in the stocks mentioned. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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