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.
[nativounit]

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 | CVX Price Prediction) 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.
[recirclink id=877593]

This is another large-cap company with a stock that offers strong value for investors. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids 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.  BofA Securities is very positive on the shares and said this:

Following the recent pullback, we are adding ConocoPhillips back to our Buy list with a higher price objective on modest balance sheet improvements. The company has led peers on the cash returns model and at current commodity levels, the potential scale of returns is impressive. While a strong balance sheet means it is inherently lower beta ConocoPhillips is well positioned vs other yield names in an oil recovery.

Investors receive a 3.02% dividend. BofA Securities has a $67 price target, and the consensus price target is $66.14. ConocoPhillips stock closed on Monday at $57.00 a share.
[recirclink id=876516]

Exxon Mobil

Shares of this mega-cap energy leader have been on fire but still have big upside potential. 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.

The analysts said this about the industry giant after it posted strong numbers for the quarter:

Earnings beat versus our estimate was entirely on chemicals with margins at a 10 year high. Solid quarter with debt down $4 billion quarter-over-quarter, cost initiatives on track and with the announced sale of UK non-core assets. Retain Buy as ExxonMobil has invested through the cycle which positions it to expand its future free cash flow to support dividends and stock buybacks.

Investors receive a 5.56% dividend, which will continue to be defended. The massive $90 BofA Securities price target compares with a much lower $63.28 target. Exxon Mobil stock closed at $62.58 on Monday.

This is a top international play for investors looking to add energy exposure and is yet another company that posted solid results. Royal Dutch Shell PLC (NYSE: RDS-A) operates as an independent oil and gas company worldwide through its Upstream and Downstream segments. The company explores for and extracts crude oil, natural gas and natural gas liquids.

Shell also converts natural gas to liquids to provide fuels and other products; markets and trades crude oil and natural gas; transports oil; liquefies and transports gas; extracts bitumen from mined oil sands and converts it to synthetic crude oil; and generates electricity from wind energy.

In addition, the company engages in the conversion of crude oil into a range of refined products, including gasoline, diesel, heating oil, aviation fuel, marine fuel, liquefied natural gas for transport, lubricants, bitumen and sulphur; production and sale of petrochemicals for industrial customers; refining; trading and supply; pipelines and marketing; and alternative energy businesses.

BofA Securities remains bullish and noted this when earnings were released:

We minimally fine-tune our above-consensus estimates, leave our price target unchanged with >40% upside and reiterate our Buy rating. First quarter results again crowned the company as the cash flow leader – which we expect to result in buybacks of $2.5 billion in the second half of 2021 and $5 billion in 2022. We believe Royal Dutsche Shell remains significantly undervalued at 16% free-cash-flow yield 2021 estimated pricing in $40 per barrel long-term Brent oil prices.

Investors in Royal Dutch Shell stock receive a 2.83% dividend. The BofA Securities price objective of $52 is near the $52.80 consensus figure. The stock ended Monday at $40.03 per share.
[recirclink id=876305]
The cybersecurity hack, from a timing standpoint, is brutal. With air travel climbing and the busy summer driving season right around the corner, consumers can bet on higher prices at the pump and maybe more expensive airline tickets. That noted, with dependable dividends and long histories of market dominance, all these stocks make good sense for growth and income investors looking to add energy, but somewhat wary due to the big run-up in oil pricing over the past year.
[wallst_email_signup]