The AI Boom Is Powering Gas-Pipeline Stocks
Written by Emily J. Thompson, Senior Investment Analyst
Updated: May 21 2024
0mins
Source: barron's
- Pipeline Stocks Outperforming: Pipeline stocks are the best-performing segment in the energy industry recently, surpassing oil producers and refiners.
- AI Data Centers Driving Demand: Rise of artificial intelligence and data centers is increasing the need for natural gas to power these facilities, benefiting pipeline companies.
- Strong Performance of Leading Companies: Kinder Morgan, Williams, Enbridge, and Oneok have seen significant stock price increases due to the demand from data centers.
- Future Growth Expectations: Analysts predict a doubling or tripling of electricity demand from data centers in the next five years, potentially boosting demand for pipelines.
- Investor Confidence Restored: Midstream companies have restored investor confidence by strengthening balance sheets, increasing dividends, and making structural changes.
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Analyst Views on XOM
Wall Street analysts forecast XOM stock price to fall
19 Analyst Rating
12 Buy
7 Hold
0 Sell
Moderate Buy
Current: 144.570
Low
114.00
Averages
132.17
High
158.00
Current: 144.570
Low
114.00
Averages
132.17
High
158.00
About XOM
Exxon Mobil Corporation is an energy provider and chemical manufacturer. The Company’s principal business involves exploration for, and production of, crude oil and natural gas; the manufacture, trade, transport and sale of crude oil, natural gas, petroleum products, petrochemicals and a wide variety of specialty products; and pursuit of lower-emission and other new business opportunities, including carbon capture and storage, hydrogen, lower-emission fuels, Proxxima systems, carbon materials, and lithium. Its Upstream segment explores for and produces crude oil and natural gas. The Energy Products, Chemical Products, and Specialty Products segments manufacture and sell petroleum products and petrochemicals. Energy Products segment includes fuels, aromatics, and catalysts and licensing. Chemical Products segment consists of olefins, polyolefins, and intermediates. Specialty Products segment includes finished lubricants, basestocks and waxes, synthetics, and elastomers and resins.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Price Volatility Risk: Brent crude prices have swung violently since the war began, peaking at $118 per barrel in March before slipping back to around $100, indicating heightened uncertainty over future prices, compelling companies to ensure profitability amid volatility.
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- Supply-Demand Crisis: The near-total closure of the Strait of Hormuz since February 28 has led to a more than 13% reduction in global oil supply and about a fifth drop in LNG flows, pushing crude prices above $100 per barrel and forcing companies to seek alternative supplies, impacting long-term market stability.
- Cautious Investment Stance: Despite BP, Chevron, and Exxon Mobil exceeding first-quarter earnings expectations, none of the five major oil companies have raised spending plans for 2026 or beyond, reflecting a boardroom shift towards capital discipline and prioritizing shareholder returns over expansion.
- Price Volatility Risk: Brent crude prices have swung violently since the war began, peaking at $118 per barrel in March before slipping back to around $100, indicating heightened uncertainty over future prices, compelling companies to ensure profitability amid volatility.
- Future Investment Outlook: While spending is expected to rise between 2026 and 2030, recent events have not prompted companies to ramp up investments; instead, they have reinforced a conservative mindset, focusing on managing price volatility rather than chasing short-term profits.
See More
Shell CEO Warns of Oil Supply/Demand Imbalance
- Global Oil Shortage: Shell CEO Wael Sawan warns of a current shortfall of 1 billion barrels of oil, a sentiment echoed by Halliburton CEO Jeffrey Miller, indicating that this shortage will exacerbate rising oil prices and impact global economic stability.
- Consensus Among Executives: CEOs from Chevron and ExxonMobil agree that it will take months to rectify the growing supply-demand imbalance, highlighting the profound effects of current geopolitical conflicts on the oil market, which necessitates cautious investor strategies.
- Dividend Performance Discrepancy: While Shell offers a dividend yield of 3.4%, Chevron and Exxon have a stronger track record of dividend growth at 3.9% and 2.8% respectively, making them more attractive for long-term investors seeking stability.
- Investment Strategy Recommendation: For long-term investors, Chevron is viewed as the most appealing option among integrated energy giants, particularly as oil prices are expected to decline, providing reliable dividend income and mitigating investment risks.
See More
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- Global Oil Shortage: The closure of the Strait of Hormuz due to the Middle East conflict has resulted in a shortage of 1 billion barrels of oil, with Shell CEO Wael Sawan and Halliburton CEO Jeffrey Miller sounding alarms about the ongoing supply/demand imbalance that is expected to last for months, impacting global energy market stability.
- Industry Response: CEOs of Chevron and ExxonMobil concur that it will take months to rectify the supply/demand imbalance once the conflict ends, indicating that the oil supply shortfall will worsen in the interim, potentially leading to increased volatility in oil prices.
- Investment Strategy: In the current high oil price environment, investors are advised to focus on integrated energy giants like Shell, Chevron, and Exxon, noting that while Shell cut its dividend in 2020, Chevron and Exxon have consistently increased theirs, demonstrating stronger financial stability.
- Dividend Yield Comparison: Currently, Chevron offers a dividend yield of 3.9%, Exxon at 2.8%, and Shell at 3.4%, making Chevron the most attractive option among integrated majors for long-term investors, especially as oil prices are expected to decline, providing reliable dividend income.
See More
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- Global Oil Shortage: Shell CEO Wael Sawan warns that the world is currently short 1 billion barrels of oil, a sentiment echoed by Halliburton CEO Jeffrey Miller, indicating a growing supply crisis that threatens global energy market stability.
- Ongoing Conflict Impact: CEOs from Chevron and ExxonMobil agree that it will take months to rectify the supply/demand imbalance, suggesting that until the Middle East conflict is resolved, oil supply shortages will persist, potentially leading to increased price volatility.
- Dividend Performance Comparison: While Shell offers a 3.4% dividend yield, Chevron and Exxon have a stronger track record of dividend growth, with Chevron at 3.9% and Exxon at 2.8%, making them more attractive to investors, especially during periods of low oil prices.
- Investment Recommendations: Analysts suggest that given Chevron and Exxon's robust balance sheets and consistent dividend growth, long-term investors in the energy sector may prefer these companies over Shell, which faces greater investment risks.
See More
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- Quarterly Valuation: The position's valuation stood at $3.84 million at quarter-end, reflecting the impact of market price changes and share count, highlighting Alumis's significance in the investment portfolio.
- Stock Performance: Alumis shares surged 350% over the past year, significantly outperforming the S&P 500's 30% gain, showcasing its robust growth potential in the biopharmaceutical sector.
- Clinical Progress: Alumis reported positive Phase 3 data for moderate-to-severe plaque psoriasis in March, with plans to submit a New Drug Application in the second half of 2026, further boosting investor confidence in its drug development pipeline.
See More
Steady Investment Choices Amid High Oil Prices
- Attractive Yields: Enterprise Products Partners and Enbridge offer dividend yields of 5.6% and 5.1%, respectively, and despite the tax complexities for investors, their stable cash flows and long histories of dividend growth make them ideal for conservative investors.
- Stable Cash Flows: Both companies operate large energy infrastructure in North America, where their fee-based model prioritizes transportation volumes over energy price fluctuations, allowing them to maintain strong cash flows even in a high oil price environment, ensuring dividend sustainability.
- Chevron's Diversification Advantage: Chevron provides a 3.7% dividend yield, and with its globally diversified operations and strong balance sheet (debt-to-equity ratio of about 0.25), it demonstrates resilience amid oil price volatility, making it suitable for investors looking to invest directly in oil production.
- Future Oil Price Expectations: While current oil prices are high, history shows that volatility is the norm, so investors should proceed cautiously, considering the potential for future price declines; the stable dividends from Enterprise, Enbridge, and Chevron provide a safety margin for investors.
See More
