Only one sector is up this month. If you guessed it is energy, you are spot on. With oil and natural gas prices already rising for the past year for a number of reasons, not the least of which has been scaled-back production, a fly in the ointment now could result in a parabolic move. With the Russians mobilizing troops to the border of Ukraine, there is a real fear that hostilities could break out.
While the situation is still uncertain, make no mistake, should fighting breakout, exports from the United States for oil, liquefied natural gas (LNG) and natural gas liquids (NGLs) could skyrocket as production in Eastern Europe could come to standstill, while demand in Europe and elsewhere shoots higher.
We screened the Goldman Sachs energy research database looking for dividend-paying companies that could benefit should the geopolitical situation take a negative turn. It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
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Baker Hughes
This somewhat contrarian play makes sense for investors looking for energy exposure via services. Baker Hughes Co. (NYSE: BKR | BKR Price Prediction) is an international industrial service company and the second-largest oilfield services and equipment company in the world by market cap. It provides the oil and gas industry with products and services for oil drilling, formation evaluation, completion, production and reservoir consulting.
The company prides itself on being a self-described energy technology company that provides solutions to energy and industrial customers worldwide. Built on a century of experience and with operations in over 120 countries, the firm’s innovative technologies and services are taking energy forward.
Baker Hughes is the core equipment provider and has a greater than 90% market share in the global LNG liquefaction development market. Top analysts across Wall Street expect that strength and market position will drive EBITDA and margin growth.
Shareholders receive a 2.66% dividend. The $32 Goldman Sachs price target on Baker Hughes stock compares with a $30.58 consensus target and Wednesday’s closing print of $27.52.
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Cheniere Energy
This may be the top LNG play. Cheniere Energy Inc. (NYSEAMERICAN: LNG) is an energy company primarily engaged in LNG-related businesses. The company operates through two segments.
Cheniere’s LNG terminal segment consists of the Sabine Pass and Corpus Christi LNG terminals. Its LNG and natural gas marketing segment consists of LNG and natural gas marketing activities by Cheniere Marketing.
Cheniere Marketing is developing a portfolio of long- and medium-term SPAs with professional staff based in the United States, the United Kingdom, Singapore, and Chile. The company conducts its business through its subsidiaries, including the development, construction, and operation of its LNG terminal business and the development and operation of its LNG and natural gas marketing business.
The company paid the first dividend in its history last fall, and Cheniere Energy stock investors now are receiving a 1.26% dividend. Goldman Sachs has a Buy rating and a Wall Street high $157 target price. The consensus target is down at $126.14, and shares closed on Wednesday at $110.26.
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) services include gathering, processing, transportation and storage of natural gas, NGL fractionation, import and export terminaling, and offshore production platform services.
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.
Investors are paid a strong 7.69% distribution. The Goldman Sachs price target is $31, while the consensus price target for Enterprise Products Partners stock is $28.59. Shares closed at $24.45 on Wednesday.
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Exxon Mobil
Despite the recent rally in oil, this mega-cap energy leader still trades below levels printed in 2020 and 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.
The company announced last month that ExxonMobil Catalysts and licensing has introduced ExxonMobil Renewable Diesel (EMRD) process technology to help meet the evolving needs for mobility, while utilizing renewable feedstock. This new process technology converts feedstocks including, but not limited to, vegetable oils, unconverted cooking oil and animal fats, into renewable diesel.
Due to significant interest in producing renewable jet fuel as a primary product, Exxon is also developing advanced catalyst and process technology solutions that will offer EMRD process licensees flexibility to tailor the amount of jet fuel versus diesel produced.
The company pays investors a 4.70% dividend, which will continue to be defended. Goldman Sachs has set an $84 price target, which is much higher than the $75.46 consensus target. Exxon Mobil stock closed trading on Wednesday at $74.17.
Royal Dutch Shell
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 NGLs.
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, LNG 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.
Investors receive a 2.71% dividend. The Goldman Sachs price objective for the Buy-rated shares is $75. The consensus figure for Royal Dutch Shell stock is $61.58, and Wednesday’s closing share price was $50.91.
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These five top energy companies could be big winners if fighting does indeed break out, but they are solid choices now regardless of how the situation in Ukraine is resolved. Demand for LNG is skyrocketing around the world, and oil prices are already closing in on the $90 a barrel level. Should the situation in Eastern Europe cools some, the shares may back up temporarily, which would be an outstanding opportunity to buy more.
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