This top pick is still down a stunning 35% this year and actually could be a takeover target. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, natural gas liquids and natural gas.
The company primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway. It continues to make solid discoveries, and the analysts noted this:
We feel that two more discoveries at Redtail & Yellowtail 2 have been looked passed over by the market – but incremental exploration success has value. In our view, it offers low cost tieback opportunities. Including just two at Liza 2 and Payara and our price objective moves up. At current levels, value dislocation looks unsustainable with Hess having just scratched the surface of exploration potential.
Holders of Hess stock receive a 2.65% dividend. The stunning $70 BofA Securities price target compares to the $57.36 consensus target and the recent share price of $38.35.
This is a solid way for more conservative investors to play the energy sector. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.
Until just recently, the company operated 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.
In August, the company announced it would sell Speedway to 7-11 in an all-cash deal valued at $21 billion, or $16.5 billion after-tax. The sale transforms the company’s balance sheet and creates options to revisit the corporate structure of MPLX. Many across Wall Street feel that with Speedway removed, the dislocation in refining value becomes even more transparent as the company trades much cheaper than its industry peers do.
Shareholders receive a 7.94% dividend. BofA Securities has set a whopping $66 price target. The consensus target is $46.00, and Marathon Petroleum stock was trading at $29.60 a share.
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. With updated 2020 and 2021 hedging adding $1.2 billion to cash flow estimates over next two years, a new $900 million credit facility further enhances liquidity. In addition, the Gulf coast marketing makes Pioneer less exposed to widening Midland differentials.
Top Wall Street analysts feel that by owning Pioneer, investors have access to a Permian growth and corporate free-cash-flow story, but with better asset level and corporate level operating/financial metrics. Some also feel that Pioneer could have an improved dividend if the cycle improves given the introduction of its variable dividend framework.
Pioneer Natural Resources stock investors receive a 2.47% dividend. The BofA Securities price target is $122. The posted consensus figure is up at $132.50, and shares were trading at $89.75 on Thursday.
While oil has had a sparkling run off the lows back in the spring, WTI is still just barely at the $40 level. That noted, any sustained reopening of the economy and a return to normal easily could spike the price as much as 25% or more. All these companies are solid ways for investors to play an upswing in oil and an improving 2021 economy. Plus, with each paying seemingly dependable dividends, patient investors will be paid to wait.