First they said oil couldn’t break $50 a barrel, then the basement was supposed to be $40, and now West Texas Intermediate is in the mid-$30s. Last week, analysts at Goldman Sachs said it could go to $20. The bottom line for shell-shocked energy investors is nobody is sure how low it will go. One thing is a given, though, over-leveraged mid and small cap companies are in big trouble, and for many this won’t end well.

An improving economy in 2016 can help, and clearly the dollar strength that we witnessed this year should taper some, but the fact remains that there is going to be some damage in the sector and it could get ugly. The best ideas for investors looking to add energy is to stay with the large cap leaders that have “been there, done that.” They have the deep pockets and the diversification to fight through this until better days return.

We screened the Merrill Lynch research database looking for large cap stocks rated Buy that pay good and reliable dividends that can be maintained. We found three outstanding choices for investors.

ConocoPhillips

This company may offer investors some of the best total return possibilities for 2016, and the Merrill Lynch analysts recently added it to the firm’s US 1 list. ConocoPhillips (NYSE: COP) is the self-described world’s largest independent exploration and production company, based on production and proved reserves.

Headquartered in Houston, ConocoPhillips had operations and activities in 25 countries and has spent the past five years divesting assets. Although it is cash rich, the company has somewhat dampened earnings and growth expectations all year long.

Many Wall Street analysts feel Conoco can accelerate growth from reloaded portfolio depth in the Bakken and Eagle Ford, with visibility on future growth from a newly disclosed sizable position in the Permian. Conoco lowered its 2015 spending target in response to the lingering slump in crude prices.

Chairman and CEO Ryan Lance said recently that Conoco expects oil prices to start to move higher late next year, but the company is significantly reducing capital and operating costs, while maintaining its commitment to safety and asset integrity. He also said Conoco retains the flexibility to adjust capital spending in response to market factors. The 2016 capital budget was announced recently at $7.7 billion. Merrill Lynch feels that, with the capex below $8 billion, and additional asset sales, the dividend should remain safe.

Conoco investors receive a very strong 6.44% dividend. The Merrill Lynch price target is a whopping $77. The consensus price target is much lower at $60.95. Conoco closed Friday at $45.93.
Exxon Mobil

This is one of Merrill Lynch’s top picks for 2016. Exxon Mobil Corp. (NYSE: XOM) is another energy sector play that the Merrill Lynch analysts are very positive on long term, as the overall corporate strength of the massive integrated giant plays a significant part in its usually solid earnings reporting pattern.

The company’s global downstream chemical segment plays a huge part for Exxon. It may be a part that others on Wall Street don’t fully appreciate as the segment contributes an estimated 16% of overall total revenue. Some very solid reasons for adding the stock to a long-term growth portfolio are the fact that the company consistently demonstrates disciplined investing, operational excellence and technological innovation.

Exxon recently appointed the head of its refining business as its new president, which makes him the probable successor to CEO Rex Tillerson, a move that was designed to avoid raising eyebrows on Wall Street. The new president, Darren Woods, is a 23-year company veteran who should keep the colossus on the steady path for growth and progress.

Exxon investors receive a very sizable 3.78% dividend. The $100 Merrill Lynch price target is well above the consensus price objective of $83.52. Shares closed Friday at $77.28, down almost 15% for the year.

Occidental Petroleum

This top energy stock is another of the higher yielding domestic stocks in the energy sector. Occidental Petroleum Corp. (NYSE: OXY) is an international oil and gas exploration and production company with operations in the United States, Middle East and Latin America. It is one of the largest U.S. oil and gas companies, based on equity market capitalization. Its midstream and marketing segment gathers, processes, transports, stores, purchases and markets hydrocarbons and other commodities in support of its businesses. In addition, the wholly owned subsidiary OxyChem manufactures and markets chlor-alkali products and vinyls.

The company posted third-quarter numbers that beat analyst expectations and also announced it would be leaving the Bakken shale after posting very heavy losses there.

Occidental also recently announced a deal with Ecopetrol to invest up to $2 billion over the next decade to increase production at the La Cira-Infantas oil field in Colombia. According to Reuters, the new round of investments will increase production in the region by more than 200 million barrels.

Shareholders receive an outstanding 4.55% dividend. Merrill Lynch has a $95 price target. The consensus target is $79.92. The stock closed on Friday at $65.96.

Oil won’t stay this low forever. Eventually somebody will blink and cut production. In the meantime, it just makes sense for investors to stay with the large cap leaders who have survived these market downturns in the past.

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