Oil has traded in a very tight range this year, and after last year’s big run higher, many investors have been disappointed. One who surely has not lost faith in the “black gold” is Warren Buffett, who recently bought an additional $130 million worth of Occidental Petroleum. Now Berkshire Hathaway owns more than 217.3 million shares of the company, valued at almost $12.7 billion. In addition, Berkshire owns close to $9.5 billion worth of Occidental preferred stock, which carries an 8% annual dividend, and has warrants to purchase $5 billion worth of Occidental common shares for $59.62 per share.
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Buffett is not the only one bullish on oil. Bank of America Securities’ commodities head of research feels that the second half of the year will see a surge in pricing that finishes 2023 close to the $90 a barrel level. The Goldman Sachs energy team sees $100 per barrel by April of 2024.
The good news for investors is that the sideways trading for the two benchmarks this year, and less interest in the sector, has brought prices in. Investors looking to initiate or add to positions are in a good spot now. We screened our 24/7 Wall St. energy research database for exploration and production stocks paying solid and dependable dividends and found seven that look like outstanding ideas.
It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
APA
This company was long considered an industry leader when it was known as Apache, and the stock is perhaps offering one of the best entry points in the sector. APA Corp. (NYSE: APA) explores for and produces oil and gas properties. It has operations in the United States, Egypt and the United Kingdom, as well as has exploration activities offshore Suriname. It also operates gathering, processing and transmission assets in West Texas, as well as holds ownership in four Permian-to-Gulf Coast pipelines.
APA is one of the largest U.S. exploration and production companies, with 2.3 billion barrels of oil equivalent of proven reserves (63% liquids). It is an explorer, acquirer and exploiter, and a fiscally conservative company that has grown its reserves and production consistently via acquisitions and organic projects.
Shareholders receive a 3% dividend. BofA Securities has a Buy rating, and its price target for APA stock is $57. The consensus target is $47.96. The closing share price on Friday was $33.41 per share.
24/7 Wall St.Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up nicely. Chevron Corp. (NYSE: CVX) engages in integrated energy and chemicals operations worldwide. The company operates in the following two segments.
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; transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.
Chevron’s 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 the cash management and debt financing activities; insurance operations; real estate activities; and technology businesses.
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Chevron posted strong first-quarter results and has a solid place in the sector when it comes to natural gas and liquefied natural gas. It remains one of the very best ways to play energy safely.
Investors receive a 3.92% dividend. UBS recently started coverage with a Buy rating and a $212 target price. Chevron stock has a consensus target of $190.65, and shares closed on Friday at $155.23.
Devon Energy
This may be one of the best value propositions in the sector, and it was one of the first to utilize a variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the United States and Canada.
The company operates approximately 19,000 wells and also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.
Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream master limited partnership (MLP) EnLink.
The dividend yield is 9.17%. Piper Sandler has an Overweight rating, and its $82 target price is well above the consensus target of $64.81. Devon Energy stock closed on Friday at $49.20.
Diamondback Energy
This red-hot energy play looks poised to press higher again. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas and New Mexico.
Diamondback Energy primarily focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin, as well as the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin.
The company owns, operates, develops and acquires midstream infrastructure assets, including 770 miles of crude oil gathering pipelines, natural gas gathering pipelines and an integrated water system in the Midland and Delaware Basins.
Diamondback Energy stock comes with a 6.98% dividend, which is of the variable variety, which means it could change depending on production and profits. A $202 target price accompanies Piper Sandler’s Overweight rating. The consensus target is $173.81, and Friday’s close was at $130.22.
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Exxon Mobil
This mega-cap energy leader trades at a reasonable valuation and still offers investors an excellent entry point. 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.
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.
Exxon Mobil reported a record first-quarter profit that was more than double from a year ago and topped Wall Street estimates, as rising oil and gas output overcame a pullback in energy prices from high levels.
Investors receive a 3.44% dividend. Exxon Mobil stock has an Overweight rating and a $145 price target at Piper Sandler. That compares with a $123.83 consensus target and Friday’s close at $106.26.
Occidental Petroleum
Over the past year, Berkshire Hathaway has been scooping up shares of this company, as we noted. Occidental Petroleum Corp. (NYSE: OXY) engages in the acquisition, exploration and development of oil and gas properties in the United States, the Middle East, Africa and Latin America.
The company’s Oil and Gas segment explores for, develops, and produces oil and condensate, NGLs and natural gas. The Midstream and Marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide and power. This segment also trades around its assets, consisting of transportation and storage capacity, and it invests in entities.
The Chemical segment manufactures and markets basic chemicals, including chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride, as well as vinyls, comprising vinyl chloride monomer, polyvinyl chloride and ethylene.
Shareholders receive a 1.23% dividend. The Truist Financial price target on the Buy-rated shares is $85. The $71.68 consensus target is closer to Friday’s $59.13 closing print for Occidental Petroleum stock.
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Pioneer Natural Resources
Many Wall Street analysts love this stock as a pure crude oil play, and the company also employs a variable dividend strategy. Pioneer Natural Resources Co. (NYSE: PXD) operates as an independent oil and gas exploration and production company in the United States.
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