7 oil stocks to buy as crude prices soar | Invest
Rising oil prices provide opportunities for investors.
A classic imbalance of supply and demand has triggered a spike in energy prices around the world. Brent crude oil prices recently topped $90 a barrel for the first time since 2014. As economies reopen to full capacity, energy demand is rebounding, while supply in China and other parts of the world is insufficient. Goldman Sachs predicts oil prices above $100 in 2022, a figure that could rise further if Russia were to invade Ukraine. Fortunately, rising oil prices are great news for oil stock margins and earnings. Here are seven oil stocks to buy today, according to investment research firm CFRA Research.
Exxon Mobil Corp. (symbol: XOM)
Exxon Mobil is the largest American oil major. CFRA analyst Stewart Glickman says Exxon has near-term bullish catalysts in developing its offshore assets in Africa and the Permian Basin. Longer term, he says, Exxon’s massive investments in low-carbon solutions could unlock value for investors. Glickman says rising crude oil prices have at least temporarily eased investor concerns about a possible 4.5% dividend cut from Exxon. Finally, Exxon recently announced a 2022 capital expenditure budget of at least $21 billion, up from $17 billion in 2021. The CFRA has a “buy” rating and a price target of $91 for XOM, which closed at $79 on Feb. 9.
Chevron Corp. (CLC)
Chevron is a major American oil company with worldwide operations. Glickman says Chevron has increased operating cash flow while reducing capital expenditures, 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 borrowing money to support its 4.1% dividend during recent periods of oil market weakness. CFRA has a “buy” rating and a price target of $145 for CVX, which closed at $137.79 on Feb. 9.
TotalEnergies SE (TTE)
TotalEnergies is a French oil and gas major. According to analyst Jia Man Neoh, TotalEnergies is a top stock choice for investors seeking exposure to the European energy sector. Neoh says Total has a defensive portfolio of upstream assets centered on low-cost liquid natural gas projects. Additionally, 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 breakeven free cash flow on a pre-dividend basis at Brent prices as low as $25 a barrel. The CFRA gave TTE a “buy” rating and a price target of $58 on January 29, but the stock has since exceeded that target and closed at $60.03 on February 9. The stock’s average price target among various 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 general weakness in U.S.-listed Chinese stocks amid concerns about regulatory repression and potential delistings, rising energy prices have driven PetroChina shares up about 68% over the past year. past year. Analyst Hazim Bahari says PetroChina is more dependent on gas revenue than oil revenue. He says China’s long-term goal of transitioning to a carbon-neutral economy will weigh on PetroChina’s earnings growth, but the stock remains an attractive value, trading at less than 50% of its book value. CFRA has a “buy” rating and a price target of $58 for PTR, which closed at $53.49 on Feb. 9.
Conoco Phillips (COP)
ConocoPhillips is one of the largest independent oil and gas exploration and production companies in the world. Glickman says ConocoPhillips’ recent acquisitions of Concho Resources and Shell PLC’s (SHEL) Permian Basin assets are somewhat surprising given ConocoPhillips’ track record of avoiding big buyout deals. However, he says the two deals should help speed up ConocoPhillips’ operations in the Permian and lower 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. The CFRA assigned COP a “buy” rating and a price target of $87 on January 29, and the stock closed at $92.95 on February 9. The stock’s average target price among various analysts is $102.25, according to the Wall Street Journal.
API BP (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 debt of around 31% is higher than many industry peers, but Neoh says BP is generating plenty of cash flow to meet its target of increasing its dividend by 4% from 4% a year. through 2025. He says the favorable energy market and asset disposals will help BP deleverage its balance sheet, and BP’s 9% cash yield alone is enough to warrant a bullish outlook. CFRA has a “buy” rating and a price target of $33 for BP, which closed at $32.99 on Feb. 9.
EOG Resources Inc. (EGG)
EOG Resources is one of America’s largest 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. Before the pandemic, Glickman says, EOG was already prioritizing yields over production growth, and much of the company’s cost-cutting measures will likely be sustainable going forward. Unfortunately, about 26% of U.S. EOG acreage is on federal land, but Glickman says production disruptions are unlikely until at least 2024. February 9. The stock has an average analyst price target of $118.03, according to The Wall Street Journal.
Ride the surge in energy prices with these oil stocks:
- Exxon Mobil Corp. (XOM)
- Chevron Corp. (CLC)
- TotalEnergies SE (TTE)
- PetroChina Co.Ltd. (PTR)
- Conoco Phillips (COP)
- API BP (BP)
- EOG Resources Inc. (EGG)
Update to February 10, 2022: This slideshow has been updated with new information.