Since topping out at $120 a barrel back in the summer of 2022, the major oil benchmarks had traded down every month until bottoming in the beginning of December. The decline from the top in the previous June was a staggering 40%. While the oil majors can still make money at that level, with a declining price many opted to slow or halt production. By March of this year, West Texas Intermediate had dropped to $67.61, a bottom that stayed in place until late June when oil finally broke out.
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OPEC recently announced that its production levels will stay in place going forward, and on Tuesday Saudi Arabia extended its 1 million barrel-per-day production cuts through the end of the year. In addition, with Russia cutting oil exports in September by 300 million barrels, the perfect storm was in place for a move higher.
We screened our 24/7 Wall St. energy research universe looking for stocks that were rated Buy, come with large and dependable dividends, and had solid upside to the posted price targets. Seven top companies came up, and all make sense for growth and income investors looking to add energy.
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 get positioned in the energy sector, and shares have backed up some. 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 (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 posted strong second-quarter results and has a solid place in the sector when it comes to natural gas and LNG. It remains one of the best ways to play energy safely.
Investors receive a 3.68% dividend. UBS has a $209 target price for Chevron stock, while the consensus target is $186.68. The shares closed on Tuesday at $166.47 apiece.
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.
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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.
Shareholders currently receive a 6.52% dividend. The $62 Raymond James target price accompanies a Strong Buy rating. Devon Energy stock has a consensus target of $60.04, and shares closed on Tuesday at $53.50.
24/7 Wall St.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.
As of December 31, 2021, the company’s total acreage position was approximately 524,700 gross acres in the Permian Basin, and estimated proved oil and natural gas reserves were 1,788,991 thousand barrels of crude oil equivalent.
It also holds working interests in 5,289 gross producing wells, as well as royalty interests in 6,455 additional wells. In addition, the company owns mineral interests approximately 930,871 gross acres and 27,027 net royalty acres in the Permian Basin and Eagle Ford Shale.
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 4.45% dividend. The Truist Financial target price is $185, and the consensus target is $174.22. Tuesday’s closing share price was $154.19.
Enterprise Products Partners
This is the largest publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers. Enterprise Products Partners L.P. (NYSE: EPD) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, NGL fractionation, import and export terminaling, and offshore production platform services.
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One reason many analysts may have a liking for the stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the master limited partnerships.
The distribution yield is 7.46%. J.P. Morgan has set its price target at $33. The consensus target is $32.22, and Enterprise Products Partners stock closed at $26.71 on Tuesday.
Northern Oil & Gas
We have covered this stock since it traded in the single digits, and it is an outstanding small-cap value idea. Northern Oil & Gas Inc. (NYSE: NOG) is an independent energy company engaged in the acquisition, exploration, exploitation, development and production of crude oil and natural gas properties in the United States.
The company primarily holds interests in the Williston Basin, the Appalachian Basin and the Permian Basin in the United States. Solid second-quarter results topped both earnings and revenue expectations.
The dividend was recently increased by 3%, the 10th consecutive increase, and now has a 3.60% yield. Northern Oil & Gas stock has a $53 target price at Truist Financial. The consensus target is $49.92, and Tuesday’s close was at $42.29.
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.
The company explores for, develops and produces oil, NGLs and natural gas. It has operations in the Midland Basin in West Texas. As of December 31, 2021, the company had proved undeveloped reserves and proved developed non-producing reserves of 130 million barrels of oil, 92 million barrels of NGLs and 462 billion cubic feet of gas, and it owned interests in 11 gas processing plants.
Its 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 the Eagle Ford in Texas, and it owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian, as it expects to deliver solid production growth going forward.
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Investors currently receive a 6.82% dividend, which could change due to the variable dividend strategy. Stifel’s $275 target price is well above the consensus target of $259.91. Pioneer Natural Resources stock closed on Tuesday at $243.03.
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.
Shareholders receive a 4.85% dividend. The BofA Securities price target for TotalEnergies stock is $85. The consensus target is lower at $72.41. The shares ended Tuesday trading at $63.80 apiece.
Demand for oil is steady, and prices could be ready to rush back toward the $100 a barrel level this fall. All these top companies are well positioned for the demand challenges and could be among the best ideas for this year and beyond.
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