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Oil May Explode Higher to $90 or More: 7 'Strong Buy' Dividend Leaders to Grab Before It's Too Late
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Since topping out at $120 a barrel back in the summer of 2022, the major oil benchmarks had traded down every month until bottoming in the beginning of December. The decline from the top in June of 2022 was a staggering 40%. While the oil majors can still make money at that level, with a declining price many opted to slow or halt production. By March of this year, West Texas Intermediate crude had dropped to $67.61, a bottom that stayed in place until late June when oil broke out.
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The Organization of the Petroleum Exporting Countries (OPEC) announced earlier this month that its production levels will stay in place going forward, and Saudi Arabia extended its 1 million barrel per day production cuts through September. In addition, Russia said it will be cutting oil exports in September by 300 million barrels. These cuts, combined with the potential increase in demand from China) could spike prices in a big way, especially with the peak usage and summer driving still in the playbook for another month.
We screened our 24/7 Wall St. energy research universe looking for stocks that were rated Buy, pay large and dependable dividends, and had solid upside to the posted price targets. Seven top companies came up, and all make sense for growth and income investors looking to add energy.
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.
The company also operates gathering, compression, processing and transmission assets in West Texas, as well as holds ownership in four Permian Basin long-haul pipelines.
Investors receive a 2.26% dividend. Truist Financial has a $59 price target for APA stock, while the consensus is just $48.88. The final share price on Monday was $43.90.
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) engages in integrated energy and chemicals operations worldwide. The company operates in the following two segments.
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 liquefied natural gas; 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 posted strong first-quarter results and has a solid place in the sector when it comes to natural gas and liquefied natural gas. It remains one of the best ways to play energy safely.
Investors receive a 3.78% dividend. The UBS target price is $209, and Chevron stock has a consensus target of $186.68. The shares closed on Monday at $160.36.
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 natural gas liquids (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.
Devon Energy stock comes with a 6.90% dividend. Stifel’s $77 target price is well above the consensus target of $59.77 and Monday’s close at $50.17.
24/7 Wall St.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.
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.
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The current dividend yield is 3.36%, but because it is of the variable variety, it could change depending on production and profits. Piper Sandler has set a $191 target price. The consensus target is lower at $170.96 and Diamondback Energy stock closed at $148.45 on Monday.
Exxon Mobil
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.
Exxon Mobil stock investors receive a 3.31% dividend, which will continue to be defended. The $139 UBS price target compares with a consensus target of $112.41 and Monday’s close at $108.71.
24/7 Wall St.Occidental Petroleum
Over the past two years, Berkshire Hathaway has been scooping up shares of this top energy leader. 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. The 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, as well as vinyls, comprising vinyl chloride monomer, polyvinyl chloride and ethylene.
Occidental Petroleum stock comes with a 1.12% dividend. Truist Financial’s price target is $85. The $68.92 consensus target is closer to Monday’s closing print of $63.73.
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Pioneer Natural Resources
Many Wall Street analysts love this stock as a pure crude oil play, and the company also employs a variable dividend strategy. Pioneer Natural Resources Co. (NYSE: PXD) operates as an independent oil and gas exploration and production company in the United States.
The company explores for, develops and produces oil, NGLs and natural 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.
Its 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.
The company is a huge player in the Permian Basin and the Eagle Ford in Texas, and it 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 going forward.
Various media sources have said the company may still be in ongoing discussions with Exxon for a possible purchase or merger.
Shareholders currently receive a 6.92% dividend, but here too it may vary from quarter to quarter. The Piper Sandler target price of $332 towers over the $256 consensus target. On Monday, Pioneer Natural Resources stock was last seen trading at $237.29.
While it remains to be seen if Exxon makes the huge play to acquire Pioneer Natural Resources, it is a good bet that if so, the competition will start thinking about doing the same. That is why we focused with the top U.S. companies. Over the past 75 years, there have been numerous big oil deals, and with prices rising, and demand from China, India and other emerging markets expected to grow in the coming years, more deals could be on tap in the energy world.
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