Energy Business

Goldman Sachs Has Its Top Oil Stocks to Buy Ahead of a Second-Half Recovery

Conoco posted solid earnings per share for the first quarter that beat consensus estimates. Many analysts see the delta on lagged realizations, lower operating expenses and taxes as solid positives. Shut-in plans are increased for May and expanded to June as a response to the oil price collapse.

Investors receive a 3.98% dividend. The Goldman Sachs price target is $38. The posted consensus price target is $46.83, and ConocoPhillips stock last closed at $39.14.

EOG Resources

This leading energy company is also a top pick across Wall Street. EOG Resources Inc. (NYSE: EOG) is one of the largest independent exploration and production companies operating in the United States, Canada, Trinidad, the United Kingdom and China.

Despite some rough going over the past month, in February the company did post adjusted fourth-quarter earnings that beat consensus expectations on better realizations, lower operating expenses and depreciation, depletion and amortization. The company had $440 million of free cash flow generated after dividends.

Shareholders receive a 3.14% dividend. The price target at Goldman Sachs is $58, while the consensus price target is $59.68. EOG Resources stock closed on Friday at $44.57.

Marathon Petroleum

This solid way to play the energy sector remains the top pick at Jefferies. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States. It operates approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.

Despite a plan to spin-off Speedway, the company announced in late February it would invest $550 million in the chain. The investment will focus primarily on converting convenience stores the company added to its portfolio through several acquisitions over the past two years — notably, its strategic combination with San Antonio-based Andeavor in the fall of 2018 — to Speedway’s branding and systems.

The company bought rival Andeavor for $23.3 billion in the biggest-ever deal for an oil refiner, creating the largest independent fuel maker in the United States. It was one of the biggest mergers in 2018. Following the deal, Marathon became the largest operator of refining capacity in the United States, and management believes the company can achieve the $1 billion in synergies that it suggests.

Shareholders receive a robust 7.02% dividend, but this one does have the potential to be trimmed. The $31 Goldman Sachs price target is lower than the $46.14 consensus figure. Marathon Petroleum stock closed Friday at $29.24.

Pioneer Natural Resources

Many Wall Street analysts love this stock for a pure crude oil play. Pioneer Natural Resources Co. (NYSE: PXD) operates a modern fleet of more than 24 top performing drilling rigs throughout onshore oil and gas producing regions of the United States and Colombia. Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.

Pioneer is a huge player in the Permian Basin and in the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. The company recently updated 2020 and 2021 hedging, adding $1.2 billion to cash flow estimates over next two years. It also added a new $900 million credit facility, which enhances liquidity. In addition, the Gulf coast marketing makes Pioneer less exposed to widening Midland differentials.

Investors receive a 2.45% dividend. The Goldman Sachs price target is $105. The consensus figure is $107.06, and Pioneer Natural Resources stock closed on Friday at $82.92.

We stayed with exploration and production companies and a refiner, and avoided oil field services due to the continued potential for domestic production shut-ins, and OPEC cuts overseas. The energy sector will remain volatile, but scale buying shares now and being patient could bring some very solid gains for investors over the rest of 2020. With the country opening back up, and the busy summer driving and vacation season all but upon us, demand looks to move substantially higher.