Oil Stocks: China And India May Be Exposed to U.S. Sanctions Over Iran

Nine EU nations and Japan have been exempted from American financial sanctions after having reduced oil purchases from Iran, but China and India are still exposed to the threat of restrictions, says Reuters. China and India are Iran’s two largest buyers of oil, and those two, plus Japan, purchase close to half of Iran’s crude exports. (STAY AHEAD OF THE CURVE: Follow Kapitall on Twitter)

The sanctions are designed to pressure Iran into shutting down its nuclear program by cutting the country’s sources of financing. This has made it difficult for them to transfer funds to pay for trade, and has also forced them to readjust oil shipments due to difficulty in securing shipping insurance. Iran’s currency, the rial, has also fallen in value. Nations that refuse to reduce their reliance on Iranian oil expose themselves to the threat of the sanctions.

Japan has been a model for cutting oil reliance on Iran after its 15-22% reduction estimation, even after the earthquake and nuclear power plant disaster. Carlos Pascual, Special Envoy and Coordinator for International Energy Affairs at the State Department, said, “If Japan was able to do what it did … that should be an example to others that they could potentially do more.”

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Here is a list of oil stocks that are more profitable than their peers, based on gross, operating, and pretax profit margins. How do you think these companies will be affected by the cut in global reliance on Iranian oil?

Use the Turbo Chart to Compare the Performance of the First Two Companies in the List to the S&P 500:

List sorted by market cap.

1. PetroleoBrasileiro (PBR, Earnings, Analysts, Financials): Engages in oil and natural gas exploration and production, refining, trade, and transportation businesses. Market cap at $177.54B. TTM gross margin at 36.06% vs. industry average at 28.13%. TTM operating margin at 19.27% vs. industry average at 10.75%.TTM pretax margin at 20.53% vs. industry average at 10.78%.

2. Suncor Energy Inc. (SU, Earnings, Analysts, Financials): Operates as an integrated energy company. Market cap at $52.05B. TTM gross margin at 28.38% vs. industry average at 28.13%. TTM operating margin at 17.93% vs. industry average at 10.75%.TTM pretax margin at 17.92% vs. industry average at 10.78%.

3. National Oilwell Varco, Inc. (NOV, Earnings, Analysts, Financials): Designs, constructs, manufactures, and sells systems, components, and products used in oil and gas drilling and production; provides oilfield services and supplies; and distributes products, and provides supply chain integration services to the upstream oil and gas industry worldwide. Market cap at $34.14B. TTM gross margin at 34.75% vs. industry average at 34.2%. TTM operating margin at 20.32% vs. industry average at 18.17%.TTM pretax margin at 19.93% vs. industry average at 13.47%.

4. Kinder Morgan, Inc. (KMI, Earnings, Analysts, Financials): Operates energy infrastructure in the United States and Canada. Market cap at $26.20B. TTM gross margin at 31.83% vs. industry average at 28.13%. TTM operating margin at 18.62% vs. industry average at 10.75%.TTM pretax margin at 12.28% vs. industry average at 10.78%.

5. Ensco plc (ESV, Earnings, Analysts, Financials): Provides offshore contract drilling services to the oil and gas industry. Market cap at $12.58B. TTM gross margin at 48.57% vs. industry average at 34.05%. TTM operating margin at 29.91% vs. industry average at 18.27%.TTM pretax margin at 25.91% vs. industry average at 13.55%.

6. Core Laboratories NV (CLB, Earnings, Analysts, Financials): Provides reservoir description, production enhancement, and reservoir management products and services to the oil and gas industry worldwide. Market cap at $6.10B. TTM gross margin at 35.03% vs. industry average at 34.19%. TTM operating margin at 27.93% vs. industry average at 18.17%.TTM pretax margin at 26.31% vs. industry average at 13.47%.

7. QEP Resources, Inc. (QEP, Earnings, Analysts, Financials): Operates as an independent natural gas and oil exploration and production company. Market cap at $5.66B. TTM gross margin at 51.34% vs. industry average at 27.83%. TTM operating margin at 15.97% vs. industry average at 10.69%.TTM pretax margin at 13.45% vs. industry average at 10.78%.

8. Patterson-UTI Energy Inc. (PTEN, Earnings, Analysts, Financials): Provides onshore contract drilling services to oil and natural gas operators. Market cap at $2.82B. TTM gross margin at 39.84% vs. industry average at 34.2%. TTM operating margin at 20.29% vs. industry average at 18.17%.TTM pretax margin at 19.9% vs. industry average at 13.47%.

9. Dril-Quip, Inc. (DRQ, Earnings, Analysts, Financials): Designs, manufactures, fabricates, inspects, assembles, tests, and markets engineered offshore drilling and production equipment for use in deepwater, harsh environment, and severe service applications worldwide. Market cap at $2.62B. TTM gross margin at 43.65% vs. industry average at 34.2%. TTM operating margin at 22.34% vs. industry average at 18.17%.TTM pretax margin at 21.62% vs. industry average at 13.47%.

10. RPC Inc. (RES, Earnings, Analysts, Financials): Provides a range of oilfield services and equipment to the oil and gas companies primarily in the United States. Market cap at $2.23B. TTM gross margin at 45.15% vs. industry average at 34.05%. TTM operating margin at 26.85% vs. industry average at 18.27%.TTM pretax margin at 26.46% vs. industry average at 13.55%.

(Written by Danny Guttridge)

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