One would think that President Biden’s initiatives on climate change would have been the worst possible scenario for the energy sector in 2021 and beyond. He stopped construction on the XL pipeline, rejoined the Paris Climate Agreement via executive order and paused drilling on federal lands, putting a shudder through energy investors. The reality, according to many on Wall Street, is that politics often takes a backseat to supply and demand dynamics, and nothing proved that more than the rise in energy prices as wind farms were shut down from the brutal cold that swept Texas and other parts of the country.

Another factor could be huge for the top companies in the sector as West Texas Intermediate crude surges to near $65 a barrel, which is the highest level in over a year. With the ongoing reopening of the economy, people are now traveling for business and pleasure, and the airlines are reporting much higher passenger numbers recently. Moreover, we are not that far away from the busy summer driving season.
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In a new report, Raymond James is very positive on three top integrated energy giants, as well as three other energy companies that make good sense now for investors looking to add positions in the sector. The report noted this:

The “re-open vs. lockdown” trade has dominated much of trading for the past 9+ months. With the first vaccinations already underway, optimism in commodity markets, and a concurrent shift toward cyclicals/value in the market positioning bets are clearly back to the re-open bucket. We agree that a recovery looks to be solid especially in the second half of 2021 and in 2022, but prefer to gain exposure on the lower-end of the risk curve in the integrateds in the near-term.

It is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

BP

This company has had a very rough 10 years, but Raymond James is coming around on the shares. BP PLC (NYSE: BP) is one of the world’s leading integrated energy companies, with operations in over 100 countries worldwide. Its operations are focused on a wide range of activities, including exploration and production of oil and gas, refining and marketing, chemicals, gas and power, and renewable energy.

The company is evolving into a far greater entity that many on Wall Street remember, and Raymond James sees a solid path forward. The report noted this:

While much has been said about BP’s push into low/no-carbon investments, we model total spending in 2021/2022 remaining near 2020 levels as management focuses on returns and improving the balance sheet (e.g., hitting the sub-$35 billion net debt target). Specifically, we see total capital spending of $14 billion in 2021, edging to $15 billion for 2022. Our model shows room for share repurchase to reenter the conversation in 2022, but conservatively do not forecast any buybacks.

Raymond James has an Outperform rating and a $30 price target on the shares. The Wall Street consensus target is $29.07, and BP stock closed on Wednesday at $26.47 a share.

This energy giant is a safer way for investors looking to be positioned in the energy sector. Chevron Corp. (NYSE: CVX) 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.
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The company gave some solid 2021 guidance in December, and Raymond James noted this:

With the strongest financial base of the majors, coupled with an attractive relative asset base, Chevron offers the most straightforwardly positive risk/reward in our view. Efficiency drivers are set to improve profitability into 2021, while a “block and tackle” capital program over the next few years should further improve competitiveness, even without more help from the macro environment. Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium term drivers (Noble integration, Permian, TCO/WPMP expansion, Gulf of Mexico exploration, Vaca Muerta, etc.) that we see supporting production levels in the coming years.

Shareholders receive a 4.78% dividend, which the analysts feel comfortable will remain at current levels. The Raymond James price target for the Outperform-rated shares is $112, though the consensus target is $116.24. The last Chevron stock trade on Wednesday was reported at $108.03.

ConocoPhillips

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 (NGLs) 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 that 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.

ConocoPhillips stock investors receive a 3.03% dividend. The Raymond James rating is Outperform with an $80 price target. That compares with the much lower $60.54 consensus target and Wednesday’s closing price of $56.83 per share.

Hess

This top pick has rallied nicely over the past year and actually could be a takeover target. Hess Corp. (NYSE: HES) is an exploration and production company that develops, produces, purchases, transports and sells crude oil, NGLs and natural gas. The company primarily operates in the United States, Denmark, Equatorial Guinea, the Joint Development Area of Malaysia/Thailand, Malaysia and Norway.
Analysts across Wall Street are positive on the growth prospects for Hess driven from Guyana. While Exxon is the operator and has executed well in finding/developing resources in the region, most analysts believe investors can get greater leverage to Guyana as a percentage of the enterprise value through Hess, without the declines in the base assets that Exxon is likely to experience.

Shareholders receive a 1.41% dividend. A $92 price target accompanies the Outperform rating at Raymond James. The posted consensus target is lower at $74.02, and Hess stock closed Wednesday’s trading at $70.75, which was up almost 3% on the day.
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Marathon Oil

This leading integrated oil and gas firm has extensive upstream operations. Marathon Oil Corp. (NYSE: MRO) operates through three segments. The North America Exploration and Production segment develops, explores for, produces and markets crude oil and condensate, NGLs and natural gas in North America.

The International Exploration and Production segment explores for, produces and markets crude oil and condensate, NGLs and natural gas in Equatorial Guinea, Gabon, the Kurdistan Region of Iraq, Libya and the United Kingdom, as well as produces and markets products manufactured from natural gas, such as liquefied natural gas and methanol in Equatorial Guinea.

The Oil Sands Mining segment mines, extracts and transports bitumen from oil sands deposits in Alberta and Canada, and it upgrades the bitumen to produce and market synthetic crude oil and vacuum gas oil.

Investors receive a 1.03% dividend. Raymond James has set a Strong Buy rating with a $19 price target, while the consensus target is just $11.90. Marathon stock closed at $11.66 on Wednesday.

Occidental Petroleum

This energy company made huge news with the 2019 purchase of Anadarko Petroleum. Occidental Petroleum Corp. (NYSE: OXY) is an oil-levered multinational organization with principal business segments in oil and gas and in chemicals.

The oil and gas segment explores for, develops, produces and markets crude oil and natural gas, primarily in the U.S. Permian Basin, Colombia, Bolivia, Libya, Oman, Qatar and Yemen. Meanwhile, the chemicals segment manufactures and markets basic chemicals, vinyls and performance chemicals.

The shares have underperformed since the Anadarko acquisition was announced and after the company essentially eliminated the dividend. However, the stock remains a solid idea for investors looking to add energy to portfolios.

Occidental stock is rated Strong Buy at Raymond James, which has a gigantic $45 price objective. The much lower $27.07 consensus price is less than Wednesday’s closing print of $29.04, which was up over 3% on the day.

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These are six top stocks for growth investors looking to add energy exposure. The analysts at Raymond James, like many across Wall Street, feel that after a very solid run for crude oil, a sideways move could be in the cards for much of the rest of the year. With that noted, holding the $60 level is more than good enough for many companies to make solid profit and generate outstanding free cash flow.

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