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Goldman Sachs Still Sees $140 Oil: 8 Dividend Energy Giants On Sale Now

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The big oil giants have been hit hard by recession fears. That is music to the ears of beleaguered consumers who have been paying $5 a gallon and more for gasoline in some parts of the country. However, according to the analysts at Goldman Sachs, prices likely will remain higher the rest of this year, and possibly beyond.

On Tuesday, both West Texas Intermediate and Brent crude traded down near the $100 level, and Wednesday they both closed below $100 for the first time since May. With that sell-off in the black gold, some of the top energy stocks were absolutely hammered. Given that the energy sector is one of the few up this year, there should be no surprise that profits were being grabbed.
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Given the current tight market, and with OPEC production maxed out, the Goldman Sachs energy team thinks prices will head higher soon. They noted this in their research report:

Fundamentally, we find little catalyst for Tuesday’s move, with the morning offering instead news of rising geopolitical tensions in Iran and record strong Saudi OSP to Asia, reflective of strong crude demand by refiners. Case in point, front-month Brent time spreads, diesel and gasoline cracks all weathered the fall in flat price, only down slightly on the day. In fact, the most notable move in oil prices in the past few days was the strength in crude time spread and physical prices, reflective of a market still in deficit. This is consistent with our tracking of oil fundamentals, with an estimated global c.1 mb/d deficit in June, with China back to drawing inventories as well.


The analysts also noted this when discussing recession potential, which we are very likely in, albeit a mild one right now:

While the odds of a recession are indeed rising, it is premature for the oil market to be succumbing to such concerns. In addition, China’s demand rebound from its aggressive lockdowns is coming in ahead of our expectations, with its large stimulus further helping local demand improve later this year. As a result, we still expect that global oil demand will rise by a larger than seasonal 2.3 million barrels per day from second quarter 2022 to third quarter 2022 (at $120/bbl). This is what the oil market needs to solve for, with this demand rebound greater than the expected increase in supply in coming months. At the even lower spot prices, we estimate this deficit to reach 0.6 mb/d, an unsustainable outcome in our view given already record low inventory levels (versus our $140 a barrel third quarter 2022 Brent forecast which instead solves for no more inventory draws).

We screened our 24/7 Wall St. energy research database looking for big dividend, mega-cap integrated oil giants, and found eight top stocks with reliable, and in some cases outsized, dividends. All are rated Buy by many major Wall Street firms, and they can be bought in front upcoming dividend ex-dates.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

BP

This is one of the premier European integrated oil giants and the Goldman Sachs analysts are very positive on the shares. BP PLC (NYSE: BP) engages in the energy business worldwide. It produces and trades in natural gas; offers biofuels; operates onshore and offshore wind power and solar power generating facilities; and provides de-carbonization solutions and services, such as hydrogen and carbon capture, usage and storage.
BP is also involved in the convenience and mobility business, which manages the sale of fuels to wholesale and retail customers, convenience products, aviation fuels, and Castrol lubricants. It is involved in refining, supply and trading of oil products, as well as operation of electric vehicle charging facilities. In addition, it produces and refines oil and gas, and it invests in upstream, downstream and alternative energy companies, as well as in advanced mobility, bio and low carbon products, carbon management, digital transformation and power and storage areas.
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Shareholders receive a 4.63% yield. The Goldman Sachs price target for the domestic shares of BP stock is $45. That compares with the $37.92 consensus target and Wednesday’s $26.72 per share close.

Chevron

This integrated giant is a safer way for investors looking to get positioned in the energy sector, as it has a solid position when it comes to natural gas. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide.

The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.

The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.

Chevron stock comes with a 3.98% dividend. Credit Suisse has a $202 target price, while the consensus target is $178.88. The shares closed on Wednesday at $140.78.

ConocoPhillips

This is another large-cap company that offers strong value for investors. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, LNG and natural gas liquids (NGLs) worldwide.

Conoco’s portfolio includes resource-rich North American tight oil and oil sands assets; lower-risk legacy assets in North America, Europe, Asia and Australia; various international developments; and an inventory of conventional and unconventional exploration prospects.

Many Wall Street analysts feel Conoco can accelerate growth from a reloaded portfolio depth in the Bakken and Eagle Ford with visibility on future growth from a sizable position in the Permian.

Investors receive a 2.27% dividend. The Barclays price target of $142 is higher than the $126.61 consensus price target. ConocoPhillips stock closed at $83.34 a share on Wednesday.

Exxon Mobil

Despite the huge rally in oil, this mega-cap energy leader trades at levels printed in 2015 and still offers investors an excellent entry point, especially after the recent sell-off. Exxon Mobil Corp. (NYSE: XOM) is the world’s largest international integrated oil and gas company. It explores for and produces crude oil and natural gas in the United States, Canada, South America, Europe, Africa and elsewhere.
Exxon also manufactures and markets commodity petrochemicals, including olefins, aromatics, polyethylene and polypropylene plastics, and specialty products, and it transports and sells crude oil, natural gas and petroleum products.
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Top Wall Street analysts expect Exxon to remain a key beneficiary in this higher oil price environment, and most remain strongly positive about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery, with Exxon Mobil offering greater downstream/chemicals exposure relative to peers.

The company pays investors a 4.15% dividend, which will continue to be defended. BofA Securities has set a $120 price target, and the consensus target for Exxon Mobil stock is $101.40. Shares closed on Wednesday at $83.28.

Marathon Petroleum

This is another solid way for investors who are more conservative to play the energy sector. Marathon Petroleum Corp. (NYSE: MPC) operates as an integrated downstream energy company, primarily in the United States.

Its Refining & Marketing segment refines crude oil and other feedstocks at its refineries in the Gulf Coast, Mid-Continent and West Coast regions of the United States. It purchases refined products and ethanol for resale. Its refined products include transportation fuels, such as reformulated and blend-grade gasolines, as well as heavy fuel oil and asphalt.

This segment also manufactures aromatics, propane, propylene and sulfur. It sells refined products to wholesale marketing customers in the United States and internationally, buyers on the spot market and independent entrepreneurs who operate primarily Marathon branded outlets, as well as through long-term fuel supply contracts to direct dealer locations primarily under the ARCO brand.

The Midstream segment transports, stores, distributes and markets crude oil and refined products through refining logistics assets, pipelines, terminals, towboats and barges. It gathers, processes and transports natural gas, and it gathers, transports, fractionates, stores and markets NGLs. As of December 31, 2021, the company operated 7,159 brand jobber outlets in 37 states, the District of Columbia and Mexico through independent entrepreneurs.

Shareholders receive a 2.75% dividend. The $135 BofA Securities price target is well above the $119.21 consensus target. Marathon Petroleum closed almost 3% lower on Wednesday at $79.31, but in aftermarket trading, the stock was up almost 5%.

Shell

This is another European energy giant that offers investors size and strength. Shell PLC (NYSE: SHEL) operates as an energy and petrochemical company in Europe, Asia, Africa, the Americas and elsewhere.

Shell explores for and extracts crude oil, natural gas and NGLs. It markets and transports oil and gas, produces gas-to-liquids fuels and other products, and operates upstream and midstream infrastructure necessary to deliver gas to market. The company also markets and trades natural gas, LNG, crude oil, electricity and carbon-emission rights, and it markets and sells LNG as a fuel for heavy-duty vehicles and marine vessels.

In addition, the company trades in and refines crude oil and other feed stocks, such low-carbon fuels, lubricants, bitumen, sulfur, gasoline, diesel, heating oil, aviation fuel and marine fuel. It produces and sells petrochemicals for industrial use, and it manages oil sands activities. Further, the company produces base chemicals, comprising ethylene, propylene and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide and ethylene glycol.
The company also generates electricity through wind and solar resources, produces and sells hydrogen, and provides electric vehicle charging services, as well as electricity storage.

Shell stock comes with a 3.48% dividend. The target price at BofA Securities is $70. The consensus target is $69.76, and the final trade Wednesday was reported at $48.01.
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TotalEnergies

This French integrated giant is another great way to play an energy rally from the European side. TotalEnergies S.E. (NYSE: TTE) operates as an integrated oil and gas company worldwide. Its Exploration & Production segment engages in oil and natural gas exploration and production activities in approximately 50 countries.

The Integrated Gas, Renewables & Power segment engages in the LNG production, shipping, trading and regasification activities; trading of liquefied petroleum gas (LPG), petcoke and sulfur, natural gas and electricity; transportation of natural gas; electricity production from natural gas, wind, solar, hydroelectric and biogas sources; energy storage activities; and development and operation of biomethane production units, as well as provides energy efficiency services.

The Refining & Chemicals segment refines petrochemicals, including olefins and aromatics; and polymer derivatives, such as polyethylene, polypropylene, polystyrene and hydrocarbon resins, as well as biomass conversion and elastomer processing. This segment also engages in trading and shipping crude oil and petroleum products.

The Marketing & Services segment produces and sells lubricants; supplies and markets petroleum products, including bulk fuel, aviation and marine fuel, special fluids, compressed natural gas, LPG and bitumen; and provides fuel payment solutions. It operates approximately 15,500 service stations.

Investors receive a 5.42% dividend. TotalEnergies stock has an $80 price target at BofA Securities. The consensus target is $64.24. The shares closed over 4% lower on Wednesday at $49.06.

Valero Energy

This Wall Street favorite is a solid energy play for conservative investors looking for safer ideas. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.

The company also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Investors receive a 3.63% dividend. The Wells Fargo analysts have a $166 price target, well above the $137.82 consensus target for Valero Energy stock. Shares were last seen on Thursday trading at $101.71 apiece.


These eight energy sector giants can continue to profit from elevated energy prices but offer investors who are more conservative a way to play the sector. With everything from the world’s largest integrated energy giants to one of the biggest refining companies, these are eight ways to generate income and participate in the biggest rally in the energy and oil space since 2011, which Goldman Sachs expects to continue.

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