On Monday, the U.S. the Department of Energy announced a notice of sale for as much as 15 million barrels of crude oil from the Strategic Petroleum Reserve (SPR) that President Biden unveiled on October 18 to help address the market supply disruption caused by the Russian invasion of Ukraine and to attempt to lower energy costs. This is the last tranche of the 180 million barrels that was approved for sale last spring, and it is expected to be released in December. It should be noted that the United States uses 20 million barrels per day, and many feel that the SPR sales are nothing more than political moves.
[in-text-ad]
What stunned many across Wall Street was the administration’s plans to start refilling the SPR at prices at or below $67 to $72, which effectively puts a floor under oil pricing as traders know that the government is a buyer at those levels. Many across the industry said they have no intention of hedging oil production by selling at those levels.

In a new research report, Goldman Sachs feels that the administration has limited options going forward and noted this:

Additional headlines since the OPEC+ meeting have highlighted other policy options available to the Administration. We find incremental SPR sales as the most likely action (16 million barrels is available from fiscal year 2023 Congressionally mandated sales), although this remains price dependent: requiring higher prices than present, and likely closer to $125 per barrel following the midterms. Such a release is likely to have only a modest influence (<$5 per barrel) on oil prices however. All options have trade-offs. Product export bans in particular could send wholesale global distillate/gasoline prices up $150/$50 per barrel respectively (to $300/150/per barrel) and still risk shortages and higher prices domestically – especially in coastal regions. All responses leave the ultimate cause of energy underinvestment unaddressed.

The bottom line for investors is that lack of production investment, much of which is due to government regulations and policy, and the potential for a variety of supply issues should keep the black gold in place at current levels, with the potential for a big move higher. The Goldman Sachs analysts also feel that there is limited downside at current levels. So we screened our 24/7 Wall St. energy coverage universe looking for stocks rated Buy with dependable dividends and solid upside to the price objectives. These seven look like outstanding ideas now.

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

Chevron

This integrated giant remains a safer way for investors looking to get positioned in the energy sector. Chevron Corp. (NYSE: CVX) 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.
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.

The company sports a sizable 3.28% dividend. Credit Suisse has a $202 target price on Chevron stock. The consensus target is $181.30, and shares closed on Tuesday at $174.93.
[in-text-ad]

ConocoPhillips

This is another large-cap company that offers strong value for investors. 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 Basin.

ConocoPhillips stock investors receive a 1.53% dividend. The $150 Raymond James price target is a Wall Street high. The consensus target is $129.57, and the stock closed on Tuesday at $124.94.

Exxon Mobil

This mega-cap energy leader trades at a reasonable valuation and offers investors an excellent 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.

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.

The 3.33% dividend will continue to be defended. The BofA Securities price target is $123, well above the $106.58 consensus target. Exxon Mobil stock closed at $105.88 on Tuesday.

Marathon Petroleum

This is another solid way for investors who are more conservative to play the energy sector. Marathon Petroleum Corp. (NYSE: MPC) operates as an integrated downstream energy company, primarily in the United States.
The Refining & Marketing segment refines crude oil and other feedstocks at its refineries in the Gulf Coast, Mid-Continent and West Coast regions of the United States. It purchases refined products and ethanol for resale. Its refined products include transportation fuels, such as reformulated and blend-grade gasolines, as well as heavy fuel oil and asphalt.
[in-text-ad]
This segment also manufactures aromatics, propane, propylene and sulfur. It sells refined products to wholesale marketing customers in the United States and internationally, buyers on the spot market and independent entrepreneurs who operate primarily Marathon branded outlets, as well as through long-term fuel supply contracts to direct dealer locations primarily under the ARCO brand.

The Midstream segment transports, stores, distributes and markets crude oil and refined products through refining logistics assets, pipelines, terminals, towboats and barges. It gathers, processes and transports natural gas, and it gathers, transports, fractionates, stores and markets NGLs. As of December 31, 2021, the company operated 7,159 brand jobber outlets in 37 states, the District of Columbia and Mexico through independent entrepreneurs.

Shareholders receive a 2.08% dividend. Raymond James analysts have set a $140 price target. The consensus target on Marathon Petroleum stock is $125.93, and shares closed at $111.44 on Tuesday.

Shell

This European energy giant offers investors size and strength. Shell PLC (NYSE: SHEL) operates as an energy and petrochemical company in Europe, Asia, Africa, the Americas and elsewhere.

Shell explores for and extracts crude oil, natural gas and NGLs. It markets and transports oil and gas, produces gas-to-liquids fuels and other products, and operates upstream and midstream infrastructure necessary to deliver gas to market. The company also markets and trades natural gas, LNG, crude oil, electricity and carbon-emission rights, and it markets and sells LNG as a fuel for heavy-duty vehicles and marine vessels.

In addition, the company trades in and refines crude oil and other feed stocks, such low-carbon fuels, lubricants, bitumen, sulfur, gasoline, diesel, heating oil, aviation fuel and marine fuel. It produces and sells petrochemicals for industrial use, and it manages oil sands activities. Further, the company produces base chemicals, comprising ethylene, propylene and aromatics, as well as intermediate chemicals, such as styrene monomer, propylene oxide, solvents, detergent alcohols, ethylene oxide and ethylene glycol.

Additionally, it generates electricity through wind and solar resources, produces and sells hydrogen and provides electric vehicle charging services, as well as electricity storage.

Shell stock comes with a 3.77% dividend. The BofA Securities $70 target price compares with a $67.44 consensus target Tuesday’s close at $52.81.

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.
The Integrated Gas, Renewables & Power segment engages in the 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.
[in-text-ad]
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.

The dividend yield here is 5.12%. TotalEnergies stock has an $82 price target at BofA Securities. The $68.14 consensus target is closer to the most recent close at $52.77.

Valero Energy

This Wall Street favorite is a solid energy play for conservative investors looking for safer ideas. Valero Energy Corp. (NYSE: VLO) is one of the largest independent petroleum refining and marketing companies in the United States. It is based in San Antonio, Texas; owns 13 refineries in the United States, Canada and Europe; and has a total throughput capacity of around 2.5 million barrels per day.

The company also is a joint venture partner in Diamond Green Diesel, which operates a renewable diesel plant in Norco, Louisiana. Diamond Green Diesel is North America’s largest biomass-based diesel plant.

Valero sells its products in the wholesale rack or bulk markets in the United States, Canada, the United Kingdom, Ireland and Latin America. Approximately 7,400 outlets carry Valero’s brand names.

Investors receive a 3.07% dividend. The Piper Sandler price target is $147, and the consensus target is lower at $136.30. Valero Energy stock closed on Tuesday at $126.80.

Get Our Free Investment Newsletter

I have read, and agree to the Terms of Use

These seven energy sector giants can continue to profit from the potential for higher energy prices but offer more conservative investors a way to play the sector. With everything from the world’s largest integrated energy giants to two of the biggest refining companies, these are seven ways to generate income and participate in what could be a strong fourth quarter and 2023 rally for the sector.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.