One of the major problems for the top oil-producing countries in the Middle East is that for most of them, oil is their export bread-and-butter. With oil prices not able to push through the $50 level and stay there, there are some severe hardships in terms of revenue, especially for the big producers like Saudi Arabia. With the OPEC members meeting on Thursday in Vienna, a production cut could spike the price of crude.
Needless to say, if OPEC does agree on production cuts, oil should see a pop in the spot price and the top companies in the sector could jump as well. We screened the Merrill Lynch research database for energy companies rated Buy that also pay dividends. We found four that look outstanding.
This top company is still down over 40% from the highs printed in 2014. Anadarko Petroleum Corp. (NYSE: APC) operates through three segments. The Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and natural gas liquids (NGLs).
The Midstream segment provides gathering, processing, treating and transportation services to Anadarko and third-party oil, natural gas and NGLs producers, as well as owns and operates gathering, processing, treating and transportation systems in the United States. The Marketing segment markets oil, natural gas and NGLs in the United States; oil and NGLs internationally; and anticipated liquefied natural gas production from Mozambique.
The company’s asset portfolio includes U.S. onshore resource plays in the Rocky Mountains, the southern United States, the Appalachian basin and Alaska; the deepwater Gulf of Mexico; and in Mozambique, Algeria, Ghana, Brazil, Colombia, Côte d’Ivoire, Kenya, Liberia, New Zealand and other countries. As of December 31, 2015, it had approximately 2.1 billion barrels of oil equivalent of proved reserves.
Anadarko investors are paid a minuscule 0.31% dividend. The Merrill Lynch price target for the stock is $95.The Wall Street consensus price objective is just $73.14. Shares closed trading on Friday at $63.75.
This company may offer investors solid upside potential despite the big dividend cut earlier this year. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, LNG and natural gas liquids (NGLs) worldwide. Conoco’s portfolio includes resource-rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects.
Many Wall Street analysts feel the company can accelerate growth from a reloaded portfolio depth in the Bakken and Eagle Ford, and with visibility on future growth from a sizable position in the Permian. The company remains one of the best values as short sellers circled after the dividend cuts and many still remain short the stock.
The Merrill Lynch team noted this in a recent report:
Conoco has redefined its investment case with the highest free cash leverage to a recovery in oil prices amongst the big oils. Management has addressed key questions around portfolio resilience: maintenance capex drops to $4.5 billion. Share buy backs prioritized over growth – 10% prospective free cash yield at $65 oil.
Investors are paid a 2.23% dividend. The Merrill Lynch price target is $80. The consensus target is $53.57, and Conoco closed Friday at $44.76.