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Max Manturov

Max Manturov

Head of investment research regulated by CySec 14.10.2021

5 bonds to invest in amid energy crisis

Oil and gas companies are currently in favourable territory against the background of rising oil prices, with Brent/WTI above $80 per barrel. However, this trend may be of medium-term nature due to the energy crisis in Europe and China and the reluctance of OPEC+ countries to rapidly increase oil production.

Therefore, our analysts recommend buying oil and gas bonds. This type of investment may be timely to reduce portfolio risks in the current environment of increased volatility. Below is a selection of 5 securities issued by large oil and gas companies.

Occidental Petroleum Corp. (rating BB)

ISIN: US674599EA94.
Current price in %: 135,5.
Par value: $1,000.
Coupon rate: 8.88%.
Next call: 15.01.2030.
Yield to call/maturity: 3.76%.
Type of coupon: fixed.
Maturity date: 15.07.2030.
Outstanding volume of debt: $1bn.

Occidental Petroleum is an American energy company engaged in oil and gas exploration and production in the United States, the Middle East and Africa. The corporation also owns several companies in the chemical industry, as well as generating and supplying electricity. It is one of the largest oil producers in the US.

Dept burden level:

● cash and cash equivalents: $4.57bn;

● net debt: $36bn;

● debt-to-equity ratio: 197.34%;

● net debt/EBITDA for the last 12 months: 4.1x;

● EBIT interest coverage, for the last 12 months: 1.67x;

● free cash flow (last 12 months): $4.16bn.

Buy Occidental Petroleum bonds >>

Valero Energy Corp. (BBB)

ISIN: US91913YAL48.
Current price in %: 133,17.
Par value: $1,000.
Coupon rate: 6.63%.
Next call: -.
Yield to call/maturity: 3.75%.
Type of coupon: fixed.
Maturity date: 15.06.2037.
Outstanding volume: $1.5bn.

Valero Energy is the largest independent oil refiner globally and the second-largest producer of renewable fuels. The corporation owns 15 refineries in the US, Canada and the UK and 13 ethanol refineries in the US. Ranked 53rd on the Fortune 500 list.

Dept burden level:

● Cash and cash equivalents: $3.57bn;

● Net debt: $14.68bn;

● debt-to-equity ratio: 78.49%;

● net debt/EBITDA for the last 12 months: 7.12x;

● EBIT interest coverage over the last 12 months: 3.39x;

● Free cash flow (last 12 months): $610m.

Buy Valero Energy bonds >>

Saudi Arabian Oil Co. (A)

ISIN: US80414L2E48.
Current price in %: 110,46.
Par value: $1,000.
Coupon rate: 4,25%.
Next call: -.
Yield to call/maturity: 3.42%..
Type of coupon: fixed.
Maturity date: 16.04.2039.
Outstanding volume: $3bn.

The Saudi Arabian Oil Company, also known as Saudi Aramco, is the world's largest oil company in terms of oil production and oil reserves. It is Saudi Arabia's top taxpayer, contributing 80% of its budget revenues. For many years it has been a global sponsor of Formula One.

Dept burden level:

● cash and cash equivalents: $67.62bn;

● Net debt: $143.88bn;

● debt-to-equity ratio: 45.37%;

● net debt/EBITDA for the last 12 months: 0.45x;

● EBIT interest coverage for the last 12 months: 51.74x;

● free cash flow (last 12 months): $67.07bn.

Buy Saudi Arabian Oil Company bonds >>

ConocoPhillips Co. (A)

ISIN: US20826FAF36.
Current price in %: 111,71.
Denomination: $1,000.
Coupon rate: 4,15%.
Next call: 15.05.2034.
Yield to call/maturity (Yield to worst): 2.98%.
Type of coupon: fixed.
Maturity date: 15.11.2034.
Outstanding volume: $245.87 mln.

ConocoPhillips is an American independent oil and gas company. It is one of the world's leading non-governmental companies in terms of verified oil and gas reserves and production capacity. ConocoPhillips also produces chemicals and plastics and develops and sells patented production technologies.

Dept burden level:

● cash and cash equivalents: $6.61bn;

● Net debt: $20.01bn;

● Debt-to-equity ratio: 45.19%;

● net debt/EBITDA for the last 12 months: 0.92x;

● EBIT interest coverage over the last 12 months: 12.79x;

● free cash flow (last 12 months): $4.2bn.

Buy ConocoPhillips bonds >>

Exxon Mobil Co. (AA-)

ISIN: US30231GBF81.
Current price in %: 116,73.
Denomination: $1,000.
Coupon rate: 4,23%.
Next call: 19.09.2039.
Yield to call/maturity: 3%.
Type of coupon: fixed.
Maturity date: 19.03.2040.
Outstanding loan volume: $2bn.

Exxon Mobil is an American multinational energy corporation, one of the industry leaders. It is engaged in the production, trade, transportation and sale of crude oil and natural gas and is one of the world's largest corporations by market capitalization. It owns leading world brands such as Exxon, Mobil, Esso and ExxonMobil Chemical and is ranked 10th on the Fortune 500 list.

Dept burden level:

● cash and cash equivalents: $3.47bn;

● Net debt: $60.61bn;

● Debt-to-equity ratio: 36.61%;

● net debt/EBITDA for the last 12 months: 2.35x;

● EBIT interest coverage for the last 12 months: 18.75x;

● free cash flow (last 12 months): $15.24bn.

Buy Exxon Mobil bonds >>

How Do I Buy Bonds?

If you do not already have an investment account, open it right now - you can do it online in 10 minutes. To do this, all you need to do is fill out a short questionnaire and go through verification.

After opening an account, you can buy bonds in these convenient ways:

1. Via the Freedom24 web-based trading platform. Search for ISIN bonds in the "Web Terminal" section. From the search results, select the company you want. Next, open a securities section in the trading window (on the right), pick the needed amount of bonds, and click the "Place a buy order" button.

2. Via the Freedom24 app for iPhone App and Android. In the "Quotes" window, click the search icon in the upper right corner. In the search window, type the company's ISIN and then choose the needed company from the list of results. Click on it and select the "Order" tab in the opened card. Specify the required number of bonds and click the "Place a buy order" button.     

*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Europe Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance Europe Ltd. do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance Europe Ltd. and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.

  • Sources of information

  • Recommendation evaluation methodology in accordance with Terms and Conditions of Market Research Use
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.