It finally hit the tape Tuesday. There was some chatter that the OPEC oil cartel finally has started to let it be known that it would reduce production if other nations did. And think about it: other than oil, what do most of these Middle East countries have that produce revenue? Exactly, nothing. With prices plunging, their countries respective big budget deficits are skyrocketing.

So who will benefit the most? The same companies that are fighting their way through the downturn: the large and mid-cap leaders who have been there before. We screened the Merrill Lynch research universe for the oil stocks that look well prepared for 2016 and could benefit big if prices start to trend higher.

Exxon Mobil

This is one of Merrill Lynch’s top 10 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 the company’s usually solid earnings reporting pattern.

The company’s global downstream chemical segment plays a huge part for Exxon. It may be a part that many others on Wall Street don’t fully appreciate as the segment contributes an estimated 16% of overall total revenue. Very solid reasons for adding the stock to a long-term growth portfolio include that the company consistently has demonstrated 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 Chief Executive 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 and should keep the goliath on the steady path for growth and progress.

Exxon investors receive a sizable 3.87% dividend. The Merrill Lynch target price is $100. The Thomson/First Call consensus price objective is $82.86. Shares closed Tuesday at $76.70.

Hess

This top mid/large cap pick is down a stunning 50% since last spring. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, natural gas liquids (NGLs) and natural gas. It primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.

The company has become the subject of takeover speculation. With a market capitalization falling to just over $10 billion, Hess could fall prey to larger integrated as a quick bolt-on acquisition to boost growth. Hess is undergoing somewhat of a transition from an integrated oil and gas company to a predominantly exploration and production entity. The company is shifting its growth approach from high-impact exploration to a smaller, more focused exploration portfolio.

Hess announced a much lower capital expenditure budget for 2016, which highlights the company’s efforts at cost containment. It said it will cut capital spending on exploration and production this year 40% from 2015 to $2.4 billion on low oil prices.

Hess investors receive a 2.82% dividend. Merrill Lynch has a massive $85 price objective, and the consensus target is much lower at $66. The stock closed most recently at $39.60.
Anadarko Petroleum

This top stock is down a stunning 65% since May of 2015. Anadarko Petroleum Corp.’s (NYSE: APC) Oil and Gas Exploration and Production segment explores for and produces natural gas, oil, condensate and NGLs. The Midstream segment provides gathering, processing, treating and transportation services to Anadarko and third-party oil, natural gas and NGLs producers, as well as owns and operates gathering, processing, treating and transportation systems in the United States. The Marketing segment markets oil, natural gas and NGLs in the United States, oil and NGLs internationally and anticipated liquefied natural gas production from Mozambique.

Anadarko’s asset portfolio includes U.S. onshore resource plays in the Rocky Mountains, the southern United States, the Appalachian basin and Alaska, as well as in the deepwater Gulf of Mexico and in Mozambique, Algeria, Ghana, Brazil, Colombia, Kenya, New Zealand and elsewhere. As of December 31, 2014, it had approximately 2.9 billion barrels of oil equivalent of proved reserves.

In December the company once again posted earnings numbers that beat estimates and raised the guidance going forward. In addition to the strong performance, it is lowering costs and keeping the balance sheet as clean as possible.

Investors receive a 3.18% dividend. The $88 Merrill Lynch price target is much higher than the consensus target of $65. Shares closed Tuesday at $34.81.

Pioneer Natural Resources

Wall Street analysts love this as a pure crude oil play, and it recently was upgraded by Deutsche Bank and Citigroup. Pioneer Natural Resources Co. (NYSE: PXD) was the ultimate shale-oil growth story for the past five years but was eviscerated in the sell-off that started over a year ago. The stock rebounded nicely since the summer but was hit hard recently and could be offering aggressive investors a very timely potential entry point.

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. Wall Street analysts were very positive on the third-quarter results and noted that the company reiterated annual production growth guidance of 15% or more while cutting the number of rigs expected to operate. With a stellar balance sheet and the new capital from a recent secondary offering, the company is poised to remain the number one player in the Permian.

Lastly, speculation always swirls that Pioneer could be a takeover target, as a big integrated wanting to make a bold move into West Texas could buy the company. Another reason suitors may be circling is the stock is trading over $100 per share lower than highs set in the summer of 2014.

Pioneer investors receive a tiny 0.7% dividend. The Merrill Lynch price target is $175. The consensus figure is $165.21, and shares closed trading on Tuesday at $113.50.

These stocks range from a huge integrated to nimble exploration and production companies that have been just hammered. If the overall picture improves, and OPEC cuts even a little, the upside could be significant.

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