We started writing in earnest about the rise of oil prices over a year and a half ago, and one of the most prescient research reports came from J.P. Morgan, when oil was still in the $70 a barrel range in September of 2021, titled “OPEC+ ‘Show me the Barrels’; $150/barrel on the horizon as capacity shocks.” The firm made the case then that not only was oil going higher, but it potentially could go much higher over the next two years. The report said this when discussing the potential for those much higher prices:

We see long-term $80/barrel Brent (real) as the marginal cost to deliver a balanced market in 2024 and beyond. Incorporating our model of OPEC+ true capacity, we expect oil to overshoot to $125/barrel in 2022 and $150/barrel in 2023.

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Both West Texas Intermediate and Brent crude are trading above the $121 mark, and there is every indication that unless there is a cessation of the war between Russia and Ukraine and a major change in domestic policy by the Biden administration, the unthinkable price of $150 per barrel oil may not only happen this year but perhaps this summer.

While the pain at the pump for Americans is grim, so is the pain from the stock market this year. It makes sense to stick with the sector that looks poised to stay hot in the coming months. It is also important to note that natural gas is trading close to the $9 level for the first time since August of 2008, as dwindling inventories have pushed prices higher.

We screened our 24/7 Wall St. energy research database looking for energy stocks that pay big dividends, are rated Buy by major Wall Street firms and still have room to run. Seven companies hit our screen and all make sense for investors looking for outstanding total return ideas.

Devon Energy

This may be one of the best value propositions in the sector, as it uses a variable dividend strategy. Devon Energy Corp. (NYSE: DVN) is an independent energy company that primarily engages in the exploration, development and production of oil, natural gas and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells.

The company also offers midstream energy services, including gathering, transmission, processing, fractionation and marketing to producers of natural gas, NGLs, crude oil and condensate through its natural gas pipelines, plants and treatment facilities.

Production is weighted toward crude oil while growth opportunities are liquids focused, anchored by the Delaware Basin, SCOOP/STACK, Eagle Ford Shale, Canadian Oil Sands, and the Barnett. Devon also owns equity in the publicly traded midstream MLP EnLink.

Shareholders receive a 6.52% dividend. Truist Financial has a $100 target price on Devon Energy stock. The analysts’ consensus target is just $78.71, and shares closed on Wednesday at $77.93.

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, NGLs fractionation, import and export terminaling, and offshore production platform services.
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One reason many analysts may have a liking for the stock might be its distribution coverage ratio. This ratio is well above 1 times, making it relatively less risky among the MLPs.

Enterprise Products Partners stock investors receive a 6.56% distribution. The Mizuho price target is $32, while the consensus target is $30.81. Shares closed at $28.37 on Wednesday.

MPLX

This is the top holding for the Alerian MLP energy exchange-traded fund. MPLX L.P. (NYSE: MPLX) is primarily engaged in crude oil and refined products transportation and terminaling in the U.S. Midwest and Gulf Coast regions, as well as natural gas gathering and processing in the northeast from its prior acquisition of MarkWest Energy in 2015. MPLX was formed by independent U.S. refiner Marathon Petroleum.

The company’s assets include a network of crude oil and refined product pipelines; an inland marine business; light-product terminals; storage caverns; refinery tanks, docks, loading racks and associated piping; and crude and light-product marine terminals. It also owns crude oil and natural gas gathering systems and pipelines, as well as natural gas and NGL processing and fractionation facilities in key U.S. supply basins.

Investors receive an 8.31% distribution. The $39 Raymond James price target compares with a $37.57 consensus target on MPLX stock and Wednesday’s closing price of $33.94.

ONEOK

The solid price of natural gas over the past year has helped to lift this top energy company. ONEOK Inc. (NYSE: OKE) primarily engages in natural gas transportation, storage and natural gas and NGLs gathering, processing and fractionation in the Bakken, Mid-Continent and Permian. The company recently closed the roll-up of its underlying MLP, ONEOK Partners.

The company has a strong presence in the Oklahoma SCOOP/STACK (NGL gathering/takeaway system, G&P), the Williston Basin (G&P, NGL takeaway) and the Permian Basin (NGL gathering, NGL takeaway, natural gas takeaway), which analysts feel provides high-return growth opportunities.
Many on Wall Street remain very positive on ONEOK’s primarily fee-based earnings, which account for 90% of total earnings.

Investors receive a 5.46% dividend. Raymond James has a $75 price target. The consensus target is $72.22, and ONEOK stock closed on Wednesday at $68.49.
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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 MLP, Phillips 66 Partners.

The company benefits from the tax-advantaged structure while still operating a more diversified operating business that also contains many assets that are not ideal MLP assets, such as its fast-growing chemical manufacturing business and its super-profitable refined products marketing business.

Phillips 66 remains a top refining idea across Wall Street, where many continue to see headroom for incremental capital returns. Most analysts are very constructive on a positive rate of change at Refining in 2022 at the company. In addition, they continue to see attractive non-refining value in the other segments.

Phillips 66 stock comes with a 3.52% dividend. The Piper Sandler price target is $120. The consensus target is $114.08, and shares closed at $110.25 on Wednesday.

TotalEnergies

This French integrated giant is another great way to play an energy rally from the European side. TotalEnergies S.E. (NYSE: TTE) operates as an integrated oil and gas company worldwide. Its Exploration & Production segment engages in oil and natural gas exploration and production activities in approximately 50 countries.

Its Integrated Gas, Renewables & Power segment engages in the liquefied natural gas (LNG) production, shipping, trading and regasification activities; trading of liquefied petroleum gas (LPG), petcoke and sulfur, natural gas and electricity; transportation of natural gas; electricity production from natural gas, wind, solar, hydroelectric and biogas sources; energy storage activities; and development and operation of biomethane production units, as well as provides energy efficiency services.

The Refining & Chemicals segment refines petrochemicals, including olefins and aromatics; and polymer derivatives, such as polyethylene, polypropylene, polystyrene and hydrocarbon resins, as well as biomass conversion and elastomer processing. This segment also engages in trading and shipping crude oil and petroleum products.
The Marketing & Services segment produces and sells lubricants; supplies and markets petroleum products, including bulk fuel, aviation and marine fuel, special fluids, compressed natural gas, LPG and bitumen; and provides fuel payment solutions. It operates approximately 15,500 service stations.

Investors receive a 3.91% dividend. TotalEnergies stock has an $80 price target at BofA Securities. The $63.98 consensus target is closer to Wednesday’s close at $61.15 a share.
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Williams Companies

This top energy company is a solid pick for investors who are more conservative and looking for exposure to LNG. Williams Companies Inc. (NYSE: WMB) operates as an energy infrastructure company primarily in the United States.

Its Transmission & Gulf of Mexico segment comprises Transco and Northwest natural gas pipelines, as well as natural gas gathering and processing, and crude oil production handling and transportation assets in the Gulf Coast region. The Northeast G&P segment engages in the midstream gathering, processing and fractionation activities in the Marcellus Shale region, primarily in Pennsylvania and New York, and the Utica Shale region of eastern Ohio.

The West segment comprises gas gathering, processing and treating operations in the Rocky Mountain region of Colorado and Wyoming, the Barnett Shale region of north-central Texas, the Eagle Ford Shale region of South Texas, the Haynesville Shale region of northwest Louisiana and the Mid-Continent region, which includes the Anadarko, Arkom, and Permian basins. It also includes NGL and natural gas marketing operations, as well as storage facilities.

Shareholders receive a 4.53% dividend. Raymond James’s $40 price objective compares with a $37.60 consensus target. Williams Companies stock closed on Wednesday at $37.49.

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These seven companies can profit from the ongoing higher energy prices and offer more conservative investors a solid way to play the sector. With everything from one the world’s largest integrated energy giants to the top energy master limited partnerships and one of the biggest refining companies, they are seven ways to generate income and participate in the biggest rally in the energy and oil space since 2011, which looks to continue the rest of 2022 and perhaps beyond.

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