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Oil price gains provide opportunities for investors.
West Texas Intermediate crude oil prices recently surpassed $80 per barrel for the first time since 2014. A classic supply and demand imbalance has triggered surging energy prices around the world. As economies open back up to full capacity, energy demand is rebounding, while supply in China and other areas of the world is short. Accordingly, oil, natural gas, coal and other energy commodity prices are now at or near multiyear highs. Higher oil prices are great news for oil stock margins and profits. Here are seven oil stocks to buy today.
Exxon Mobil Corp. (ticker: XOM)
Exxon Mobil is the largest U.S. oil major. Analyst Stewart Glickman, analyst with CFRA Research, says Exxon's top-tier balance sheet took a hit during the pandemic, but 2024 could be a major turning point for Exxon. By that time, Exxon is expected to begin producing oil from its massive Payara field in Guyana, which should be a significant long-term source of cash flow for the company. Income investors are likely relieved that the company's 5.6% dividend survived the 2020 downturn, and Glickman projects Exxon's 2021 earnings will surpass 2019 levels. CFRA has a "buy" rating for XOM stock.
PetroChina Co. Ltd. (PTR)
PetroChina is the largest oil and gas producer in China. Despite broad weakness in U.S.-listed Chinese stocks due to concerns over regulatory crackdowns and potential delistings, rising energy prices have sent PetroChina shares up about 70% year to date. Analyst Hazim Bahari, analyst with CFRA, says PetroChina relies more on natural gas earnings at this point after divesting pipeline assets in 2020. Bahari projects that 20% revenue growth in 2021 will moderate to just 4% growth in 2022, but he says the stock is still cheap at its current valuation. CFRA has a "buy" rating for PTR stock.
TotalEnergies SE (TTE)
TotalEnergies is a French oil and gas major. Jia Man Neoh, analyst with CFRA, says TotalEnergies is his top stock pick among European oil majors. He likes the company's defensive upstream asset portfolio, which is heavily exposed to low-cost liquid natural gas projects. Neoh says TotalEnergies has an impressive renewable development project pipeline, and the company's business is extremely efficient. TotalEnergies can generate break-even free cash flow at Brent crude oil prices as low as $25 per barrel, and Neoh says the company also has a "best-in-class" balance sheet. CFRA has a "strong-buy" rating for TTE stock.
ConocoPhillips is one of the world's largest independent oil and gas exploration and production companies. The company made headlines in September when it agreed to buy the Permian Basin assets of Royal Dutch Shell PLC (RDS.A, RDS.B) for $9.5 billion, boosting its net acreage by 30%. Glickman says the Shell deal was steeply priced, but it creates potentially significant opportunities for synergy. ConocoPhillips is clearly focusing on the Permian Basin. In 2020, the company also acquired Permian-based Concho Resources for $9.7 billion. CFRA has a "buy" rating for COP stock.
BP PLC (BP)
BP is a British integrated oil and gas company. Neoh says the company's targeted 50 gigawatts of renewable generation capacity by 2030 is an indication of its planned long-term pivot to renewables. BP had just 3.3 GW of renewable capacity as of 2020. The company says it will invest roughly $5 billion annually to reach its long-term goals, but Neoh says the investment is a necessary step in the right direction to ensure the company's future. BP also recently raised its dividend and restarted its share buyback program. CFRA has a "buy" rating for BP stock.
Pioneer Natural Resources Co. (PXD)
Pioneer Natural Resources is an onshore U.S. oil and gas producer primarily focused on the Permian Basin. Glickman says the company's relatively high exposure to oil over gas has helped Pioneer outpace the financial returns of many of its peers. He says the company's reserve life of 9.5 years is relatively low, but its Permian acreage has attractive, low-cost wells. Glickman says Pioneer's buyout of Parsley Energy helped address its reserve life issues, and the stock is trading at a steep discount to fair value. CFRA has a "buy" rating for PXD stock.
Schlumberger Ltd. (SLB)
Schlumberger is a leading global oil field services company. Glickman says the 2020 downturn likely helped inspire Schlumberger's long-term transition to clean energy services. He predicts Schlumberger will outshine competitors in clean energy tech given the company's long-term track record of superior innovation. Schlumberger already has nearly 100 technologies dedicated to reducing upstream carbon emissions, and it also has new energy projects focused on large-scale clean hydrogen and geothermal energy. As oil producers look to reduce their carbon footprints, Glickman says Schlumberger could be a big winner. CFRA has a "buy" rating for SLB stock.
Oil stocks to buy as crude prices surge:
-- Exxon Mobil Corp. (XOM)
-- PetroChina Co. Ltd. (PTR)
-- TotalEnergies SE (TTE)
-- ConocoPhillips (COP)
-- BP PLC (BP)
-- Pioneer Natural Resources Co. (PXD)
-- Schlumberger Ltd. (SLB)