Oil price gains provide opportunities for investors.
A classic supply-and-demand imbalance has triggered surging energy prices around the world. Brent crude oil prices recently surpassed $90 per barrel for the first time since 2014. As economies open back up to full capacity, energy demand is rebounding, while supply in China and other areas of the world is short. Goldman Sachs projects oil prices of more than $100 in 2022, a figure that could rise even further if Russia were to invade Ukraine. Fortunately, higher oil prices are great news for oil stock margins and profits. Here are seven oil stocks to buy today, according to investment research firm CFRA Research.
Exxon Mobil Corp. (ticker: XOM)
Exxon Mobil is the largest U.S. oil major. CFRA analyst Stewart Glickman says Exxon has near-term bullish catalysts in the development of its offshore African and Permian Basin assets. Longer term, he says Exxon’s heavy investments in low-carbon solutions could unlock value for investors. Glickman says rising crude oil prices have at least temporarily alleviated investor concerns about a potential cut to Exxon’s 4.5% dividend. Finally, Exxon recently announced a 2022 capital expenditures budget of at least $21 billion, up from $17 billion in 2021. CFRA has a “buy” rating and a $91 price target for XOM, which closed at $79 on Feb. 9.
Chevron Corp. (CVX)
Chevron is a U.S. oil major with operations around the world. Glickman says Chevron has grown operating cash flow while cutting capital spending, which is a testament to the company’s efficiency. He says Chevron’s upstream business was much more profitable than Exxon’s in 2021, and the company has long-term growth opportunities in low-carbon solutions, renewable fuels and hydrogen. Glickman says Chevron will prioritize deleveraging its balance sheet in 2022 after it borrowed money to support its 4.1% dividend during recent periods of oil market weakness. CFRA has a “buy” rating and a $145 price target for CVX, which closed at $137.79 on Feb. 9.
TotalEnergies SE (TTE)
TotalEnergies is a French oil and gas major. Analyst Jia Man Neoh says TotalEnergies is a top stock pick for investors looking for exposure to the European energy sector. Neoh says Total has a defensive upstream asset portfolio centered on low-cost liquid natural gas projects. In addition, Neoh says, the company has an impressive renewable energy development pipeline. Finally, TotalEnergies has a “best-in-class” balance sheet and is positioned to generate break-even free cash flow on a pre-dividend basis at Brent prices as low as $25 per barrel. CFRA gave TTE a “buy” rating and a $58 price target on Jan. 29, but the stock has since gone past that target and closed at $60.03 on Feb. 9. The stock’s average price target among a variety of analysts is $63.80, according to The Wall Street Journal.
PetroChina Co. Ltd. (PTR)
PetroChina is the largest oil and gas producer in China. Despite broad weakness in U.S.-listed Chinese stocks due to concerns over regulatory crackdowns and potential delistings, rising energy prices have sent PetroChina shares up about 68% in the past year. Analyst Hazim Bahari says PetroChina is more levered to gas earnings than oil earnings. He says China’s long-term goal of transitioning to a carbon-neutral economy will weigh on PetroChina’s earnings growth, but the stock is still a compelling value, trading at less than 50% of its book value. CFRA has a “buy” rating and a $58 price target for PTR, which closed at $53.49 on Feb. 9.
ConocoPhillips (COP)
ConocoPhillips is one of the world’s largest independent oil and gas exploration and production companies. Glickman says ConocoPhillips’ recent acquisitions of Concho Resources and the Permian Basin assets of Shell PLC (SHEL) are somewhat surprising given ConocoPhillips’ track record of avoiding large buyout deals. However, he says the two deals should help fast-track ConocoPhillips’ operations in the Permian and reduce its average unit cost per well. Concho has few major debt milestones until 2027, and Glickman says rising oil prices suggest the timing of the deals was perfect. CFRA gave COP a “buy” rating and an $87 price target on Jan. 29, and the stock closed at $92.95 on Feb. 9. The stock’s average target price among a variety of analysts is $102.25, according to The Wall Street Journal.
BP PLC (BP)
BP is a British integrated oil and gas company. Neoh says BP has done a good job balancing cash distribution and production growth. The company’s net gearing of around 31% is above many industry peers, but Neoh says BP generates plenty of cash flow to meet its goal of growing its 4% dividend by 4% annually through 2025. He says the favorable energy market and asset divestments will help BP deleverage its balance sheet, and BP’s 9% cash return alone is enough to justify a bullish outlook. CFRA has a “buy” rating and a $33 price target for BP, which closed at $32.99 on Feb. 9.
EOG Resources Inc. (EOG)
EOG Resources is one of the largest U.S. oil and gas exploration and production companies. Glickman says EOG has valuable, liquids-rich assets, and its Dorado gas assets in South Texas are conveniently located near export hubs. Prior to the pandemic, Glickman says, EOG was already prioritizing returns over production growth, and much of the company’s cost-cutting measures will likely be sustainable moving forward. Unfortunately, about 26% of EOG’s U.S. acreage is on federal land, but Glickman says production disruptions are unlikely until at least 2024. CFRA gave EOG a “buy” rating and a $106 price target on Jan. 29, and the stock closed at $113.31 on Feb. 9. The stock has an average analyst price target of $118.03, according to The Wall Street Journal.
Ride the swell in energy prices with these oil stocks:
— Exxon Mobil Corp. (XOM)
— Chevron Corp. (CVX)
— TotalEnergies SE (TTE)
— PetroChina Co. Ltd. (PTR)
— ConocoPhillips (COP)
— BP PLC (BP)
— EOG Resources Inc. (EOG)
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7 Oil Stocks to Buy as Crude Prices Surge originally appeared on usnews.com
Update 02/10/22: This slideshow has been updated with new information.
