We are yet to get first-quarter 2025 results from the energy companies, with the oil-energy sector’s earnings season to start this week. In the meantime, Exxon Mobil Corporation XOM has already offered an early glimpse of how the quarter might have shaped up. As oil and natural gas prices were buoyant in the March quarter, we expect BP plc BP and SLB SLB to beat on first-quarter earnings.

Favorable Q1 Oil & Gas Prices

Per the data from the U.S. Energy Information Administration (“EIA”), the average Cushing, OK WTI spot prices for January, February, and March of this year were $75.74, $71.53 and $68.24 per barrel, respectively. Thus, the overall pricing environment was favorable in the first quarter of 2025, as the breakeven costs of the exploration and production companies in the shale plays are significantly lower.

However, although crude prices were advantageous in the March quarter of this year, the overall prices of the commodity were a bit higher at $74.15, $77.25 and $81.28 per barrel in January, February and March of 2024, respectively. Hence, the oil-energy sector is likely to have generated lower total earnings in the first quarter of 2025 as compared to the prior-year quarter.

Our data suggests that in the March quarter of 2025, the sector will probably generate total earnings of $27.5 billion, lower than $30.5 billion in the first quarter of 2024.

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Notably, the pricing scenario for natural gas was not only healthier but also favorable in the first quarter of 2025.

Upstream Firms Appear Well-Poised Ahead of Q1 Earnings

Since the prices of both crude oil and natural gas were favorable for exploration and production activities, upstream energy players will likely report handsome first-quarter results. Oilfield service players will also likely remain in the sweet spot since they help upstream firms set up oil and gas wells effectively.   

XOM, one of the largest integrated energy players, recently reported in an SEC filing that it expects its upstream earnings for the March quarter to increase sequentially by as much as $800 million. The company attributed advantageous oil and gas prices for the improvement. Moreover, ExxonMobil expects its Energy Products business unit to witness a sequential improvement of $300-$700 million owing to the changes in industry margins.

Here’s How to Pick the Right Stocks

With the existence of a number of players in the sector, finding the right energy stocks that have the potential to beat on earnings can be daunting. Our proprietary methodology, however, makes it fairly simple.

You could narrow down the list of choices by looking at stocks that have the combination of a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), and a positive Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Our Choices

SLB

SLB is a leading oilfield service player. As exploration and production activities were favorable, SLB is likely to have witnessed increased demand for its well construction, completions and reservoir characterization activities.

SLB currently has an Earnings ESP of +0.20% and a Zacks Rank of 3. It is slated to report first-quarter 2025 results on April 25.

The company's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 1.78%. (Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)

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BP

BP, a British energy giant, currently has an Earnings ESP of +9.14% and carries a Zacks Rank #3. Supportive commodity prices are likely to have aided BP. The company is slated to report first-quarter 2025 results on April 29.

However, BP expects its production from upstream operations to be lower sequentially. BP’s earnings beat the Zacks Consensus Estimate in two of the last four quarters and missed in the other two, delivering an average negative surprise of 3.04%.

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This article originally published on Zacks Investment Research (zacks.com).

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