While it did not seem like it at the gasoline pump initially, the price of oil had dropped a stunning 27% since March when West Texas Intermediate recently bounced off the $94 support level. As the black gold heads back over the $100 mark, beleaguered motorists have finally seen a solid price drop at the pump, and it was not because service station and convenience store owners cut their pricing, as the president had suggested.
The reality for Americans is that we are likely into a higher-for-longer phase for crude oil pricing for a number of reasons. Demand is still very strong on a worldwide basis, the current administration has handicapped production increases domestically, and geopolitical issues always seem to stir the supply side of the equation.
The good news for investors is the hefty pullback in crude oil prices has not only brought the top stocks back to outstanding entry points, but, according to the analysts at RBC Capital Markets, “At current levels, North American senior exploration and production (E&P) companies are trading at an average debt-adjusted cash flow multiple of 3.3 times in 2022 and 2.4 times in 2023.” In other words, by almost every metric, they are cheap and demand remains strong.
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We screened our 24/7 Wall St. energy universe looking for the top U.S. large-cap E&P stocks with Buy ratings across Wall Street, while the companies pay big, dependable dividends and are buying back shares. Seven top stocks hit our screen, but it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector, and shares have backed up nicely. Chevron Corp. (NYSE: CVX | CVX Price Prediction) engages in integrated energy and chemicals operations worldwide.
The Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with liquefied natural gas (LNG); transportation of crude oil through pipelines; and transportation, storage and marketing of natural gas, as well as operating a gas-to-liquids plant.
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The Downstream segment engages in refining crude oil into petroleum products; marketing crude oil, refined products and lubricants; manufacturing and marketing of renewable fuels; transporting crude oil and refined products by pipeline, marine vessel, motor equipment and rail car; and manufacturing and marketing of commodity petrochemicals, plastics for industrial uses, and fuel and lubricant additives. It is also involved in cash management and debt financing activities, insurance operations, real estate activities and technology businesses.
Chevron stock has a 4.07% dividend. The Credit Suisse target price of $202 is well above the $177.59 consensus target. Shares closed on Monday at $139.58.
ConocoPhillips
This large-cap company also offers strong value for investors, and it reports earnings Wednesday. ConocoPhillips (NYSE: COP) explores for, produces, transports and markets crude oil, bitumen, natural gas, LNG 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 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.
Investors receive a 2.16% dividend. Barclays has a $142 price target for ConocoPhillips stock. The consensus price target is $125.34, and shares ended Monday trading at $85.07.
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 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 6.59% dividend. The $103 Truist Financial target price is well above the $79.17 consensus target. Devon Energy stock closed on Monday at $54.62.
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EOG Resources
This leading energy company is one of the top ideas now across Wall Street. EOG Resources Inc. (NYSE: EOG) explores for, develops, produces and markets crude oil, and natural gas and NGLs.
The company’s principal producing areas are in New Mexico and Texas and in the Republic of Trinidad and Tobago. As of December 31, 2021, it had estimated net proved reserves of 3,747 million barrels of oil equivalent, including 1,548 million barrels (MMBbl) of crude oil and condensate reserves, 829 MMBbl of natural gas liquid reserves and 8,222 billion cubic feet of natural gas reserves.
EOG Resources posted outstanding first-quarter results in May, and many analysts are expecting the same again in August. The company generated a stunning $2.4 billion in free cash flow in the first quarter and rewarded shareholders with a massive special dividend of $1.80 per share, in addition to the regular $0.75 dividend.
Investors receive a 3.01% dividend. Truist Financial recently raised its $170 price target to $180. EOG Resources stock has a $149.85 consensus target, and Monday’s final print was $99.53.
Exxon Mobil
This mega-cap energy leader trades at levels printed in 2015 and offers investors an excellent entry point after the recent sell-off. 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.
Top Wall Street analysts expect Exxon to remain a key beneficiary in this higher oil price environment, and most remain strongly positive about the company’s sharp positive inflection in capital allocation strategy, upstream portfolio, and leverage to a further demand recovery, with Exxon Mobil offering greater downstream/chemicals exposure relative to peers.
Exxon Mobil stock investors receive a 4.09% dividend, which will continue to be defended. BofA Securities has set a $120 price target. The consensus target is $102.90, and shares closed at $86.10 on Monday.
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Occidental Petroleum
The legendary Warren Buffett has been loading the boat and now owns a stunning 19.2% of the stock. Occidental Petroleum Corp. (NYSE: OXY) engages in the acquisition, exploration and development of oil and gas properties in the United States, the Middle East, Africa and Latin America.
The company’s Oil and Gas segment explores for, develops and produces oil and condensate, NGLs and natural gas. Its Midstream and Marketing segment gathers, processes, transports, stores, purchases and markets oil, condensate, NGLs, natural gas, carbon dioxide and power. This segment also trades around its assets, consisting of transportation and storage capacity, and it invests in entities.
Occidental’s Chemical segment manufactures and markets basic chemicals, including chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride.
Investors receive just a 0.87% dividend. The target price on Occidental Petroleum stock at Barclays is $84. The consensus target is $75.83, and shares closed on Monday at $60.05.
Pioneer Natural Resources
Many Wall Street analysts love this stock as a pure crude oil play and, the company also is looking to employ variable dividends. Pioneer Natural Resources Co. (NYSE: PXD) operates as an independent oil and gas E&P company in the United States.
The company explores for, develops and produces oil, NGLs and gas. It has operations in the Midland Basin in West Texas. As of December 31, 2021, the company had proved undeveloped reserves and proved developed non-producing reserves of 130 million barrels of oil, 92 million barrels of NGLs and 462 billion cubic feet of gas, and it owned interests in 11 gas processing plants.
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Pioneer production services are supported by 100 well-servicing rigs, more than 100 cased-hole, open-hole and offshore wireline units, and a range of advanced coiled tubing units.
Pioneer is a huge player in the Permian basin and the Eagle Ford in Texas, and the company owns more than 20,000 locations in the world’s second-largest oil reservoir in the Midland Basin. With a stellar balance sheet, the company is poised to remain a top player in the Permian, as it expects to deliver solid production growth in 2022 and beyond.
The dividend yield is 8.26%, though it may vary from quarter to quarter. The Barclays target price is $339. The consensus target is lower at $299.53. The final Pioneer Natural Resources stock trade on Monday was at $214.05 a share.
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Note that Devon and Pioneer Natural Resources are using variable dividend programs, so it is very possible their big dividends could shrink at some juncture. The other five will pay consistent and, in most cases, above-average dividend yields that are very dependable. While second-quarter results should be outstanding for all these companies, it may make sense to buy partial positions or use a buy-write covered call strategy when adding shares or initiating new positions.
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