The benchmark Oil indices of Brent Crude and West Texas Intermediate were set to soar over $100 just a few weeks ago. Massive Saudi and OPEC+ production cuts, U.S producers halting drilling in some regions, and then the perfect storm: a Hamas attack on Israel, which started yet another war in the oil-rich Middle East.
Did Oil explode to $100 and higher? Hardly, demand concerns and a weakening Chinese economic future started the selling. Add in Russian exports increasing in addition to rising inventories and short-sellers pounding the sector on demand concerns, and you have just a few of the issues that have sent oil prices for both of the significant benchmarks back to levels last seen in July.
So what happens now? The Saudi Arabian government and OPEC+ have zero interest in oil staying at current levels, and there are a few scenarios that could play out for those looking to grab energy stocks now, with some at their lowest levels in almost four months.
- The Saudi Arabian government and OPEC+ will continue their production cuts deep into 2024 and cut production even more
- The Middle East war gets more intense and spreads, and production all over the region is hampered
- Iran gets involved in the conflict and blocks or slows traffic in the Strait of Hormuz
We screened our 24/7 Wall Street energy stock research database looking for bargains and found five top companies that are all ‘Strong Buy’ rated by leading Wall Street analysts and pay big and dependable dividends.
Chevron
This integrated giant is a safer way for investors looking to get positioned in the energy sector and pays a rich 4.11% dividend. Chevron Corporation (NYSE: CVX | CVX Price Prediction) engages in integrated energy and chemicals operations worldwide through its subsidiaries.
The company operates in two segments: Upstream and Downstream.
- 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; transportation of oil petroleum through pipelines; and transport, storage, and marketing of natural gas, as well as operates 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 renewable fuels; transporting crude oil and advanced 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.
Chevron offers cash management, debt financing, insurance operations, real estate, and technology businesses.
This is one of the three energy holdings in Warren Buffett’s Berkshire Hathaway, which holds 123 million shares of the integrated giant.
Devon Energy
This energy company utilizes the variable dividend strategy to pay investors a massive 7.38% dividend. Devon Energy Corporation (NYSE: DVN), an independent energy company, primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs) in the United States and Canada. It operates approximately 19,000 wells.
The company also offers midstream energy services through
- Natural gas pipelines, plants, and treatment facilities, including gathering, transmission, processing, fractionation, and marketing to natural gas producers, NGLs, crude oil, and condensate producers.
Production is weighted toward crude oil, while growth opportunities are liquids focused – and 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 MLP EnLink.
Diamondback Energy
This red-hot energy play looks poised to press higher again after the recent selling. 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.
Diamondback Energy is focused on developing
- The Spraberry and Wolfcamp formations of the Midland Basin
- The Wolfcamp and Bone Spring formations of the Delaware Basin which are part of the Permian Basin in West Texas and New Mexico.
The company also owns, operates, develops, and acquires midstream infrastructure assets, including
- 770 miles of crude oil gathering pipelines
- Natural gas gathering pipelines
- An integrated water system in the Midland and Delaware Basins of the Permian Basin
Investors are paid a stellar 4.11% dividend, which is also of the variable variety, which means it could change depending on production and profits.
Enterprise Products Partners
This company is the most significant publicly traded energy partnership and a leading North American provider of midstream energy services to producers and consumers.
Enterprise Products Partners L.P. (NYSE: EPD) provides various midstream energy services.
- Gathering, processing, transporting, and storing natural gas,
- Natural gas liquids (NGL) fractionation,
- Import and export terminalling, and
- Offshore production platform services.
The company has four reportable business segments:
- Natural Gas Pipelines and Services,
- NGL Pipelines and Services
- Petrochemical Services
- Crude Oil Pipelines and Services.
One of the reasons many analysts may like the stock might be its distribution coverage ratio. The company’s distribution coverage ratio is well above 1x, making it relatively less risky in the MLP sector.
Enterprise investors are paid a strong 7.45% distribution.
Exxon Mobil
This mega-cap energy leader now trades just above a 52-week low, offering investors a dependable 3.60% dividend. Exxon Mobil Corporation (NYSE: XOM) explores and produces crude oil and natural gas in the United States and internationally.
Exxon Mobil operates through Upstream, Energy, Chemical, and Specialty Products segments.
- The Upstream segment explores and produces crude oil and natural gas. Chevron Corporation
- The Energy Products segment offers fuels, aromatics, catalysts, and licensing services.
- The Chemical Products segment manufactures and markets petrochemicals, including olefins, polyolefins, and intermediates.
- The Specialty Products segment offers performance products, including lubricants, basestocks, waxes, synthetics, elastomers, and resins. Crude oil, natural gas, petroleum products, petrochemicals, and other specialty products; and pursuit of lower-emission business opportunities, including carbon capture and storage, hydrogen, and lower-emission fuels.
Exxon Mobil is also involved in the manufacturing, trade, transport, and sale of
- Crude oil,
- Natural gas,
- Petroleum products,
- Petrochemicals
- Specialty products; and
- Pursuit lower-emission business opportunities, including carbon capture and storage, hydrogen, and lower-emission fuels.
Volatility will remain in the energy sector, and depending on how long the Israel-Hamas war lasts, which could be protracted, there is every reason to think that prices will continue to press higher regardless of the recent sell-off. Savvy investors can scale in by buying partial positions now and adding more shares after the major oil companies announce earnings next week.
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