In an effort to bring down the skyrocketing price of oil earlier this year, the Biden administration thought it would be a good idea to raid the country’s Strategic Petroleum Reserve, better known as the SPR. By the time they were done, under much scrutiny it might be added, a total of 180 million barrels had been removed and sold into the open market, including some sales to China.
While it might have seemed like a good idea, the reality is that the United States alone uses almost 20 million barrels of oil per day, so what was removed amounted to a paltry nine days of inventory. Oil prices did come down, but that was due to supply and demand forces, the Russia-Ukraine conflict and Covid lockdowns in China.
Last Friday, the U.S. Department of Energy said it would begin buying back oil for the Strategic Petroleum Reserve. The department will buy up to 3 million barrels for delivery in February, a senior official told reporters. This action was met with applause, as many had criticized the drawdown of the SPR as political and dangerous, as the withdrawals reduced levels in the reserve to about 380 million barrels, the lowest since 1984, raising concerns about energy security.
One group of stocks that may benefit are domestic energy producers. With many trading at the lowest levels in some time, now is a good time to pick up the mega-cap leaders that also pay big and dependable dividends. We screened our 24/7 Wall St. energy research database and found five top companies that look like outstanding ideas for 2023. 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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APA
This company was long considered an industry leader when it was known as Apache, and the stock is perhaps offering one of the best entry points in the sector. APA Corp. (NYSE: APA | APA Price Prediction) explores for and produces oil and gas properties. It has operations in the United States, Egypt and the United Kingdom, as well as has exploration activities offshore Suriname. It also operates gathering, processing and transmission assets in West Texas, as well as holds ownership in four Permian-to-Gulf Coast pipelines.
The company is one of the largest U.S. exploration and production companies, with 2.3 billion barrels of oil equivalent of proven reserves (63% liquids). It is an explorer, acquirer and exploiter, and a fiscally conservative company that has grown its reserves and production consistently via acquisitions and organic projects.
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APA reported third-quarter net income of $422 million, after reporting a loss in the same period a year earlier. The company said it had profit of $1.28 per share, and adjusted earnings topped Wall Street expectations.
Shareholders receive a 2.28% dividend. Citigroup team has a $62 price target for APA stock. The consensus target is lower at $55.58, and the last trade for Monday came in at $43.84 a share.
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.
Chevron’s Upstream segment is involved in the exploration, development, production and transportation of crude oil and natural gas; processing, liquefaction, transportation and regasification associated with 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.
Chevron stock comes with a 3.37% dividend. The $215 Raymond James target price is well above the $192.07 consensus target and the most recent close at $169.88.
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, liquefied 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.
Investors receive a 2.15% dividend. The Truist Financial price target is a Wall Street high $167. The consensus target for ConocoPhillips stock is $139.15, and Monday’s close was at $110.44.
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Exxon Mobil
Despite the rally in oil this year, this mega-cap energy leader trades at a reasonable valuation and still 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 top U.S. oil producer reported a per-share profit of $4.68, easily exceeding Wall Street’s consensus view, on a huge jump in natural gas earnings, continued high oil prices and strong fuel sales.
The dividend has a yield of 3.48% and will continue to be defended. Jefferies has set a $133 price target, while the consensus target is $118.18. Exxon Mobil stock closed on Monday at $105.17.
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Occidental Petroleum
Over the past year, Berkshire Hathaway has been buying shares of the company in a massive way. 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.
Its 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.
The Chemical segment manufactures and markets basic chemicals, including chlorine, caustic soda, chlorinated organics, potassium chemicals, ethylene dichloride, chlorinated isocyanurates, sodium silicates and calcium chloride.
Earlier this year, Berkshire Hathaway received regulatory approval to buy up to 50% of the stock. The investment giant currently owns 194.4 million shares of Occidental, which is a 20.9% stake. Some reports have indicated Warren Buffet will not acquire a controlling stake.
Shareholders receive a 0.83% dividend. Occidental Petroleum stock has a $74 price target at Barclays. The consensus target is higher at $77.23, and Monday’s closing print was $62.41.
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These five top stocks have backed up in price to the lowest levels since October, and they are offering investors outstanding entry points. Many in the industry feel the oil prices have the ability to trade much higher in 2023, as inventories have shrunk dramatically and there is the hope that hostilities in Ukraine turn for the better and the Covid lockdowns in China are loosened.
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