One of the biggest stories that emerged over the holiday weekend was that energy conglomerate Exxon Mobil Corp. (NYSE: XOM) is reportedly in talks to acquire Permian shale drilling giant Pioneer Natural Resources Co. (NYSE: PXD). If it comes to pass, the purchase of Pioneer, which has a market capitalization near $49 billion, would be the company’s biggest deal since the merger with Mobil in 1999.
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With a huge vault of cash, and looking to increase production, Exxon purchasing Pioneer would not only make the proverbial rich get richer, but it would greatly expand the mega-integrated leader’s footprint in the Permian Basin, which has among the largest cache of resources in the world. In addition, it could spark a wave of additional mergers and acquisitions as competitors try to keep up with Exxon.

We screened our 24/7 Wall St. energy exploration and production universe looking for additional companies that could be the target of some of Exxon’s biggest competitors, like Chevron and ConocoPhillips. Five top companies hit our screens, and all are rated Buy and pay solid dividends like Pioneer does.

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

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) 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.

APA 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.

Shareholders receive a 2.63% dividend. Truist Financial has a $51 price target for APA stock, and the consensus target is $48.96. Shares closed almost 3% higher on Monday at $39.09.

Coterra Energy

This company was formed by the closing of the $17 billion merger of Cabot Oil & Gas and Cimarex Energy in 2021. Coterra Energy Inc. (NASDAQ: CTRA) is an independent oil and gas company engaged in the development, exploration and production of oil, natural gas and natural gas liquids (NGLs) in the United States. It primarily focuses on the Marcellus Shale, with approximately 177,000 net acres in the dry gas window of the play located in Susquehanna County, Pennsylvania.
Coterra also holds Permian Basin properties with approximately 306,000 net acres and Anadarko Basin properties located in Oklahoma with approximately 182,000 net acres. In addition, it operates natural gas and saltwater disposal gathering systems in Texas. The company sells its natural gas to industrial customers, local distribution companies, oil and gas marketers, major energy companies, pipeline companies and power-generation facilities.
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Coterra Energy stock investors receive an 8.22% variable dividend. The Goldman Sachs target price of $30 is near the $30.23 consensus target. Monday’s close at $25.65 was a gain of almost 3% on the day.

Devon Energy

This may be one of the best value propositions in the sector, and it was one of the first to utilize 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.

The company operates approximately 19,000 wells and 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 master limited partnership (MLP) EnLink.

The dividend yield here is 9.56%. Piper Sandler has set an $85 target price, while Devon Energy stock has a consensus target of just $67.03. The shares closed on Monday at $53.39.

Diamondback Energy

This red-hot energy play looks poised to press higher again. Diamondback Energy Inc. (NASDAQ: FANG) is an independent oil and natural gas company focused on the acquisition, development, exploration and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas and New Mexico.
Diamondback Energy primarily focuses on the development of the Spraberry and Wolfcamp formations of the Midland basin, as well as the Wolfcamp and Bone Spring formations of the Delaware basin, which are part of the Permian Basin.
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The company owns, operates, develops and acquires midstream infrastructure assets, including 770 miles of crude oil gathering pipelines, natural gas gathering pipelines and an integrated water system in the Midland and Delaware Basins.

Investors receive an 8.05% dividend, which is also of the variable variety, meaning it could change depending on production and profits. The $207 Piper Sandler target price is well above the $173.48 consensus target, and Diamondback Energy stock closed on Monday at $143.19.

Marathon Oil

This is a solid way for investors who are more conservative to play the energy sector. Marathon Oil Corp. (NYSE: MRO) operates as an independent exploration and production company in the United States and internationally.

The company engages in the exploration, production and marketing of crude oil and condensate, natural gas and NGLs, as well as the production and marketing of products manufactured from natural gas, such as liquefied natural gas (LNG) and methanol. It also owns and operates 32 central gathering and treating facilities, as well as the Sugarloaf gathering system, a 42-mile natural gas pipeline through Karnes and Atascosa Counties in Texas.

Wall Street analysts are positive on the prospects for the company’s second-quarter earnings, which are expected to be reported on August 3.

Marathon Oil stock comes with a 1.57% dividend. The Wells Fargo target price is $40. That compares with a $33.03 consensus target and Monday’s closing print of $25.76.

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While it remains to be seen if Exxon Mobil does make the huge play to acquire Pioneer Natural Resources, it is a good bet that the competition will start thinking about doing the same. Over the past 75 years, there have been numerous big oil deals. With prices on the rise, and demand from China, India and other emerging markets expected to grow over the coming years, more deals could be on tap in the energy world.

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