Energy Business

Will Oil Explode Higher After the Colonial Pipeline Cyberattack? Buy 4 Integrated Energy Giants Now.

In one of the biggest and most incredible cybersecurity failures in recent history, the Colonial Pipeline, which is literally the jugular for much of the energy transportation in the United States, was hacked and many are alleging the culprit was the work of a Russian-speaking ransomware group called DarkSide. The forced shutdown of Colonial Pipeline last Friday, which is America’s largest refined products system, transporting about 2.5 million barrels per day from the Gulf Coast to eastern states, could add pressure on already rising oil prices.

Gasoline futures spiked Monday on concerns about shortages just ahead of the summer driving season, and there are some reports that traders are working to find alternative supplies, with some chartering tankers from Europe. Plus, there has been some talk of withdrawals from the Strategic Petroleum Reserve. The company did say late Monday that some capacity was indeed brought back online, and it hopes to have services restored by the end of the week. However, the magnitude of the hack is mind-boggling, given the potential ramifications.

While this should be resolved at some point, investors want to know what, if this happens regularly, where they may strike to buy stocks while the iron is hot. The most logical place looks like the mega-cap energy integrated supermajors. We screened the BofA Securities energy research universe and found four top stocks that all make sense for investors looking to add energy now as oil continues to skew higher. Some on Wall Street see Brent crude hitting $80 a barrel this year.

While all four of these stocks are rated Buy at BofA Securities, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Chevron

This integrated giant is a safer way for investors looking to stay or get long the energy sector, and it has big Permian Basin exposure. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company, with worldwide operations in exploration and production, refining and marketing, transportation and petrochemicals.

The company sports a sizable dividend and has a solid place in the sector when it comes to natural gas and liquefied natural gas (LNG). Some Wall Street analysts estimate the company will have a compound annual growth rate of over 5% for the next five years.

The company posted solid first-quarter results and the analysts said this:

Chevron delivered an in line quarter with expectations with adj. EPS of $0.90 including a $0.16 impact from winter storm Uri. It raised its dividend confirming the first call on free cash but a flat production trend raises questions on maintenance capital. We Maintain Buy on relative exposure to an oil recovery.

Investors receive $1.34 per share, which is a very solid 4.89% dividend. The BofA Securities price target for Chevron stock is $125, while the Wall Street consensus target is $119.20. Monday’s last trade came in at $109.57.