This is one of the higher yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals. The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. The chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.
With a rock-solid balance sheet and a commitment to dividend coverage, investors look safe for now. Occidental has paid quarterly cash dividends continuously since 1975, and it has increased its dividend each year since 2002.
The market has shown a mixed reaction to the company’s gigantic first bolt-on acquisition in the Southern Delaware basin, where it acquired 35,000 net acres in Reeves and Pecos for $2 billion. Overall, Merrill Lynch is positive on the deal.
Shareholders receive a 4.22% dividend. Merrill Lynch has an $83 price target, and the consensus target is $77.71. The shares closed on Friday at $72.11 apiece.
Royal Dutch Shell
This company has survived the plunge in oil pricing as good as or better than any other major integrated stock. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and NGLs.
Royal Dutch Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.
In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, LNG for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.
The company generated 3.83 billion cubic feet per day of natural gas in the second quarter of this year from its integrated gas operations and another 6.40 billion cubic feet per day from its upstream operations. It produced solid third-quarter results that exceeded Merrill Lynch expectations. The firm noted in a recent research report:
We increase our estimates and price objective as a result of results – remaining above consensus. We reiterate our Buy rating and continue to see Royal Dutch Shell as our preferred Integrated Oil Supermajor.
Investors receive a huge 5.9 % dividend. The $60 Merrill Lynch price target is near the the consensus target of $59.94, and the shares closed Friday at $54.11.
The combination of the OPEC production cuts with worldwide growth expected to finally grow at a more normal level could be just the combination ticket for another solid year for energy stocks.