With about 70% of S&P 500 companies already in with earnings results for the fourth quarter, one sector is the hands-down winner for the quarter and 2022, and that is energy. While the benchmark pricing for both Brent and West Texas Intermediate crudes have backed up from the elevated $120 per barrel last summer, prices currently are rising. Plus, with Brent now at $84 and WTI at $77, all the major companies are making very solid money.
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Investors in energy have fared much better than most over the past year, and it is a good bet that the positive strength for the sector remains. Despite the rhetoric from some about egregious profits, stock buybacks and dividend increases, the reality is energy is extremely cyclical. Exxon alone lost $22 billion in 2020 when the pandemic hit. Did the government reimburse them for the losses?

We screened our 24/7 Wall St. energy research database for the mega-cap majors that hit the proverbial ball out of the park for the fourth quarter. The following six stocks look like very tempting buys now, especially as the seasonal tailwind for energy is right around the corner. We focused on companies that are rated Buy, and it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

BP

This is one of the premier European integrated oil giants, and top Wall Street analysts are quite positive on the shares. BP PLC (NYSE: BP) engages in the energy business worldwide. It produces and trades in natural gas; offers biofuels; operates onshore and offshore wind power and solar power generating facilities; and provides de-carbonization solutions and services, such as hydrogen and carbon capture, usage and storage.

The company is also involved in the convenience and mobility business, which manages the sale of fuels to wholesale and retail customers, convenience products, aviation fuels, and Castrol lubricants. It is involved in refining, supply and trading of oil products, as well as operation of electric vehicle charging facilities. In addition, it produces and refines oil and gas, and it invests in upstream, downstream and alternative energy companies, as well as in advanced mobility, bio and low carbon products, carbon management, digital transformation and power and storage areas.

The company posted record 2022 earnings, along with the biggest profit in the 114-year history of the company. In addition, management announced a 10% increase in the dividend and an extra $2.75 billion of buybacks to an already big scheduled program.

Holders of BP stock will receive a 4.13% yield, with the coming increase. Piper Sandler’s $39 target price may be headed higher, and it compares with the $39.60 consensus target. Tuesday’s $37.75 closing share price was up over 8% on the day after the aforementioned outstanding results.

This energy giant is a solid play for investors who are more conservative and looking to be positioned in the sector. Chevron Corp. (NYSE: CVX) is a U.S.-based integrated oil and gas company with worldwide operations in exploration and production, refining and marketing, transportation, and petrochemicals. The company sports a sizable dividend and has a solid place in natural gas and liquefied natural gas (LNG).
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With the strongest financial base of the majors, coupled with an attractive relative asset base, many on Wall Street feel that Chevron offers the most straightforwardly positive risk/reward. Although current conditions do not warrant a large focus on production growth, Chevron possesses numerous medium-term drivers that should support production levels in the coming years.

Chevron reported full-year 2022 earnings of $35.5 billion, well above the $15.6 billion in 2021, and increased its dividend by 6%. This increase puts Chevron on track to make 2023 the 35th consecutive year with an increase in annual dividend payout per share.

Investors will receive a 3.75% dividend when the increase is factored in. The $212 Raymond James price target is a Wall Street high. The consensus target for Chevron stock is $194.04, and shares closed at $174.09 on Tuesday.

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, natural gas liquids (NGLs) and LNG worldwide.

The company 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.

The company posted revenues that beat estimates, while earnings fell slightly behind the consensus forecast.

Shareholders receive a 2.16% dividend. BofA Securities has a $140 price target for ConocoPhillips stock. The consensus target is $138.12, and shares closed on Tuesday at $112.02.

Exxon Mobil

Despite the recent rally in oil stocks, 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.
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The top U.S. oil producer reported fourth-quarter 2022 earnings of $12.8 billion, or $3.09 per share, as well as full-year earnings of $55.7 billion, or $13.26 per share. In addition, Exxon Mobil announced that it will be increasing its dividend by 3.4% from last year’s comparable payment on March 10 to $0.91 a share.

After the increase, the yield will be 3.26%, and the dividend will continue to be defended. The Truist Financial price target of $151 is well above the $125.85 consensus target. And Exxon Mobil stock closed trading on Tuesday at $114.92.

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.

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

Shell delivered a record $40 billion profit in 2022. The European giant also posted a record fourth-quarter profit of $9.8 billion, after a strong recovery in earnings from LNG trading, beating analyst forecasts for an $8.0 billion profit. The company also increased its dividend by a strong 15%.

Shareholders will receive a 3.98% dividend, with the increase. Shell stock has a $74 target price at BofA Securities. The consensus target is $69.38, and Tuesday’s $59.61 close was up over 3% for the day.

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.
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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.

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.

While finding comprehensive final earnings for the quarter proved to be difficult, the company still pays the highest dividend of all of the mega-cap integrated leaders.

TotalEnergies stock comes with a 4.92% dividend. The BofA Securities price target is $85. That compares with a $72.50 consensus target and with Tuesday’s close at $61.78 a share.

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Given the shaky geopolitical state of the world, we decided to focus on the mega-cap domestic and foreign sector leaders. Needless to say, if the current administration fails to pivot on the overregulation and energy policy mistakes, the current supply situation likely will worsen. Now is a good time to stay put, add to a position or start accumulating mega-cap energy leaders for 2023.

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