On Friday, January 1, 2021, West Texas Intermediate crude was trading at $48.52 a barrel and Brent crude at $51.82. Both are now hovering just below the $85 mark, and the analysts at Goldman Sachs think that $90 a barrel is all but a given, despite some of the factors that resulted in some selling last week. With oil currently at the highest levels in seven years, many investors and traders may be thinking it’s time to sell, but the reality is that many of the stocks in the industry, while certainly higher than in January, have room to run.
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Numerous items highlight the recent pullback, not the least of which is more production coming online. The speed that the economy has come back and the reluctance of OPEC to ramp up output means higher prices are almost a given. The Goldman Sachs report said this:

After reaching their highest level in seven years, oil prices sold off last week, raising questions on whether the recent rally had overshot fundamentals. We believe instead that this move lower is only a short-term and transient pull-back in an otherwise intact bull market. The sell-off was triggered by news that Iran was working on a potential return to negotiations and exacerbated by the sell-off in Chinese coal and European gas prices on comments that Russia could start filling its European storage. Importantly, neither of these headlines represent shifts in fundamentals. Even if negotiations with Iran restart, the path to a deal could take time and our assumption that exports resume in April may still prove too optimistic.

We screened the Goldman Sachs energy research universe looking for companies with solid upside potential and that paid solid and dependable dividends. These four make sense for investors looking to have an energy position but wary of the big move the sector has made.

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) provides a wide variety of midstream energy services, including gathering, processing, transportation and storage of natural gas, natural gas liquids fractionation, import and export terminaling, and offshore production platform services.

One reason many analysts like 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.

Enterprise Products Partners stock investors receive a 7.89% distribution. The Goldman Sachs price target of $26 is less than the $28.28 consensus target. Shares closed on Monday at $22.80.

Exxon Mobil

Shares of this mega-cap energy leader backed up nicely as oil sold off in August, and they still offer investors an incredible 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 5.36% yield dividend will continue to be defended. Goldman Sachs has a $71 price target, and the consensus target is just $68.40. Exxon Mobil stock closed on Monday at $65.63.
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Marathon Petroleum

This is a solid way for investors who are more conservative to play the energy sector, and it resides in the Goldman Sachs U.S. Conviction list. Marathon Petroleum Corp. (NYSE: MPC) is one of the largest independent petroleum refining and marketing companies in the United States.

Until just recently, the company operated approximately 2,750 retail sites under the Marathon and Speedway brands. In addition, it operates a logistics network of pipelines, barges, trucks and terminals that store and transport crude and products.

Last year, the company announced it would sell Speedway to 7-11 in an all-cash deal valued at $21 billion, or $16.5 billion after-tax. The sale transforms the company’s balance sheet and creates options to revisit the corporate structure of MPLX. Many on Wall Street feel that with Speedway removed, the dislocation in refining value becomes even more transparent as the company trades much cheaper than its industry peers do. The deal is expected to close before the end of the year.

Shareholders receive a 3.45% dividend. The $69 Goldman Sachs price target for Marathon Petroleum stock compares with a $70.07 consensus figure. Shares closed at $67.26 on Friday.

Phillips 66

This extremely diversified energy company has a long and successful operating history. Phillips 66 (NYSE: PSX) operates through four segments: Midstream, Chemicals, Refining, and Marketing and Specialties. The company holds many of these assets within its master limited partnership, Phillips 66 Partners.

The company is able to benefit from the tax-advantaged structure while still operating a more diversified operating business that also contains many assets that aren’t ideal master limited partnership assets, such as its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.

The stock sold off recently and offers investors an outstanding entry point, Those looking for income will be glad to know that the ex-dividend date for the quarterly payment is November 16, so investors have time to have a position in place and get paid the dividend as well.

Investors receive a 4.71% dividend. The Goldman Sachs price target is $95. The consensus target on Phillips 66 stock is just $74.06, but shares closed most recently at $78.14.

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These four top stocks still have room to run and offer investors looking for income dependable quarterly payments. We added refining stocks and a master limited partnership, along with an integrated giant, for safety, given the precarious level at which many stocks are trading now.

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