This top pick has rallied nicely over the past 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, NGLs and natural gas. The company primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.
Analysts across Wall Street are positive on the growth prospects for Hess driven from Guyana. While Exxon is the operator and has executed well in finding/developing resources in the region, most analysts believe investors can get greater leverage to Guyana as a percentage of the enterprise value through Hess, without the declines in the base assets that Exxon is likely to experience.
Shareholders receive a 1.42% dividend. The $82 Goldman Sachs price target is higher than the $78.43 consensus figure. Hess shares closed at $70.53 on Tuesday.
This is a solid way for more conservative investors to play the energy sector, and it resides in the U.S. Conviction list stock. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.
Until just recently, Marathon Petroleum 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.
Last year, 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 on 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. The deal now is expected to close in this quarter.
Shareholders receive a 4.41% dividend. Goldman Sachs has set a $64 price target. The consensus target is $60.25, and Marathon Petroleum closed most recently at $52.57.
While oil stocks have rallied off the dreadful lows of last year, heading into the strongest seasonal time for the sector, and taking advantage of recent selling, may set up energy investors and those looking to add the sector for some solid summer gains.