Sixteen years to the day that Hurricane Katrina left almost all of New Orleans and much of the surrounding area underwater, Hurricane Ida has slammed into southeast Louisiana as a monster Category 4 storm. While not the unmitigated disaster that Katrina was, the rebuild will once again take time, and many services could take days or even weeks to be put back online.
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One area that is always affected when a huge storm comes in is oil and gas production in the Gulf of Mexico. Rigs are shut down and crews are evacuated. West Texas Intermediate crude prices are spiking back to $70 per barrel, and growth and income investors looking to seize the moment may want to consider buying any or all of the mega-cap integrated supermajors, which all pay big and dependable dividends.
We screened our 24/7 Wall St. database looking for the integrated giants rated Buy at major Wall Street firms, and we updated pricing and dividend payouts. While all four of the stocks here are rated Buy, 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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Chevron
This energy giant is a solid way for investors who are more conservative to be positioned in the sector. 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.
With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward. 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, and so on) that should support production levels in the coming years.
Chevron posted quarterly earnings of $1.71 per share, beating the consensus estimate of $1.54 per share. This compares to a loss of $1.59 per share a year ago. These figures are adjusted for non-recurring items. The report represents an earnings surprise of about 11%.
Shareholders receive a hefty 5.43% dividend, which the analysts feel comfortable will remain at current levels. The BofA Securities price target for the shares is $125. The consensus target price is lower at $122.86. The last Chevron stock trade on Friday was reported at $98.64 a share.
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ConocoPhillips
This is another large-cap company that offers strong value for investors, and it reports earnings tomorrow. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, liquefied natural gas and natural gas liquids worldwide.
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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. Goldman Sachs is very positive and said this when discussing the prospects for big oil:
While we expect upstream oil/gas producers to inflect positively quarter over quarter given stronger pricing realizations as commodity prices recover, we expect refining to act as a headwind and chemicals a tailwind to earnings/cash flow for more integrated companies.
ConocoPhillips stock investors receive a 3.03% dividend. Goldman Sachs has a $68 price target, but the consensus target is up at $74.95. The stock closed on Friday at $56.74.
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Exxon Mobil
Shares of this mega-cap energy leader have been on fire, and with people on the road for summer travel and vacations, there still could be some big gasoline consumption. 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.
Exxon also posted stellar results for the second quarter. Its upstream segment net income came in above consensus estimates, rebounding sharply from the year-ago quarter’s pandemic-depressed lows. The upstream segment is involved in the exploration and development of oil and natural gas properties, as well as the extraction and production of crude oil and natural gas. It benefits from higher oil prices. Earnings and revenue continue to rebound as the global economy recovers from last year’s pandemic-induced shock.
The company pays investors a 6.24% dividend, which will continue to be defended. The $90 BofA Securities price target is well above the $66.28 consensus figure. Exxon Mobil stock closed at $55.77 on Friday.
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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 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.
Shell posted a net profit of $5.5 billion for the second quarter of the year on the back of stronger oil prices and said it will buy back $2 billion worth of shares. The company also booked free cash flow of $9.7 billion for the period, up from $200 million a year earlier, and reduced its net debt to $65.7 billion from $77.8 billion for the second quarter of 2020.
Investors receive a 3.15% dividend. BofA Securities has set a price objective of $57. The consensus target price for Royal Dutch Shell stock is $55.95. Shares ended last week at $40.30 apiece.
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Oil prices plunged lower in August, and these four stocks are offering the best entry points since March. With prices expected to jump, you can bet investors will be returning to the sector leaders fast. With that noted, as they come with dependable and big dividends, and long histories of market dominance, these stocks make good sense for growth and income investors looking to add energy.
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