4 Blue-Chip Energy Stocks That Could Start Gushing in 2015

It’s been a pretty painful six or seven months for the vast bulk of energy stocks. As oil prices have dropped considerably, so have cash flows, profits and earnings for the sector.

conoco phillips refinery 630

Likewise, share prices for the various energy stocks have dropped as well. The broad-based benchmark index ETF — the Energy Select Sector SPDR ETF (NYSEARCA:XLE) — has fallen about 19% from its recent peak.

And yet, the pain my finally be ending for the energy sector.

That’s because the supply/demand dynamic that has been causing the drop in energy prices may be coming to an end. According to recent reports issued by the Organization of the Petroleum Exporting Countries (OPEC), worldwide demand for crude oil should go up this year due to the lower prices. At the same time, capital expenditures and drilling cuts in the U.S. will end the supply glut by the end of 2015.

The combination of these two factors should help push crude oil prices in the second half of the year.

That’ll also push up the prices for many energy stocks — a welcome sign for many investors and could make the sector a great buy for the second half of the year.

But which ones could be the best to buy today? Here’s four blue-chip energy stocks that could start gushing as oil prices finally rise.

Blue-Chip Energy Stocks That Could Start Gushing: EOG Resources Inc (EOG)

Blue-Chip Energy Stocks That Could Start Gushing: EOG Resources Inc (EOG)Already one of the lowest cost producers of crude oil, EOG Resources Inc (NYSE:EOG) has managed to thrive in the current low-price environment. The firm can make money when oil prices are down in the mid-$40’s per barrel.

That’s nearly an unheard-of feat for most energy stocks.

That position stems from its leadership role in Texas’ Eagle Ford Shale, Pennsylvania’s Marcellus and North Dakota’s Bakken. The firm’s vast acreage position in these fields has allowed it to enjoy lower cost savings per well than rivals.

About 46% of EOG’s net proved reserves come from oil. And despite increasing production over the last few years, EOG is keeping much of those reserves in the ground. Aside from cutting CAPEX spending, the firm has engaged in a strategy of drilling, but not fracking new wells in the Bakken. That keeps the oil in the ground until prices rise and helps put pressure on the oil service providers to cut costs.

Both of those scenarios will pad EOG’s bottom line in the future. EOG can sit back, wait and essentially “turn on the spigot” in order profit from the rise in oil prices when the time is right.

That should help send shares upwards. Currently, some top analysts have a $105 per share price target on EOG stock. That’s about an 8.2% gain from today’s selling price.

Blue-Chip Energy Stocks That Could Start Gushing: Pioneer Natural Resources (PXD)

Pioneer Natural Resources 185Falling 23% from its peak, the time to bet on blue-chip energy stock Pioneer Natural Resources (NYSE:PXD) could be at hand.

PXD is a direct bet on the prolific Permian Basin. Pioneer is one of the largest landholding energy stocks in the Permian, with 825,000 gross acres and more than 7,000 wells. The key is that the bulk of those assets are actually traditional vertical and conventional wells located in the West Spraberry field of the Permian. The Spraberry is the fifth-largest oil field in the nation and PXD’s conventional wells continue to pump out low-cost production.

So it stands to reason as oil prices rise, so will the value of that oil.

But there still is growth opportunities at PXD. The firm has begun fracking its acreage in the Permian as well. That’ll help it pull more higher-valued oil out its vast acreage. And since it owns its own fracking fleet, it’s able to control costs better than many rival energy stocks.

Add in the fact that PXD was one of the first energy stocks approved to begin exporting condensate/light oil, and you have a recipe for a gusher once oil prices resume their march higher.

Shares of PXD stock can be had for a price-to-earnings ratio of 25.

Blue-Chip Energy Stocks That Could Start Gushing: Occidental Petroleum Corporation (OXY)

Blue-Chip Energy Stocks That Could Start Gushing: Occidental Petroleum Corporation (OXY)After spinning off its heavily regulated Californian assets as California Resources Corporation (NYSE:CRC), Occidental Petroleum Corporation (NYSE:OXY) could be one of the best blue-chip energy stocks to buy.

The firm is an integrated giant with assets spanning the globe, including legacy holdings in the Middle East, Permian Basin and Latin America. In fact, OXY’s assets in the Permian account for more than 15% of the formations total production, while joint ventures and partnerships in Qatar, Oman and the United Arab Emirates (UAE) produced 42% of 2014’s total worldwide production. Those assets are long-lived and are feature relatively low costs of production.

Higher oil prices down the road will only boost OXY’s profits further.

But investors may not need to wait. OXY is also a huge refiner and producer of petrochemicals. These downstream assets have been able to feast on lower oil prices as well as cheap natural gas feedstocks. That’s helped OXY fight back the tide in terms of lower earnings. The combination of the two sides — E&P and refining — creates a balanced energy stock for investors, with hefty cash flows and a juicy 3.9% yield.

All in all, this combination has analysts at Credit Suisse raising their price targets for OXY stock by nearly 9%.

Blue-Chip Energy Stocks That Could Start Gushing: ConocoPhillips (COP)

Blue-Chip Energy Stocks That Could Start Gushing: ConocoPhillips (COP)While it’s no longer an integrated energy stock, ConocoPhillips (NYSE:COP) is still as blue-chip as they come — and a company that is quickly becoming all about shale oil production.

After spinning out its refining and downstream assets, COP has launched headfirst into North America’s various shale formations. That’s taken the firm into such regions as the Eagle Ford and Bakken. All in all, Conoco holds total acreage in the U.S. just larger than the state of West Virginia. This vast acreage size — along with international projects — have helped boost cash flows and dividends at the energy stock for years.

But COP isn’t just resting on its laurels. The firm continues to get leaner and meaner.

Executives at COP recently announced plans to increase the oil producer’s focus on the development of shale reserves in the U.S. That will shift CAPEX spending from expensive deep oil projects and LNG into the easier-to-control world of shale drilling.

Additionally, COP plans on selling a variety of high-cost U.S. shale assets to drive earnings even further. The new focus solely on cheap shale will create a leverage effect when oil prices rise.

In the meantime, investors are treated to sector-leading dividend yield (4.3%) and cheap share price (P/E of 14).

As of the writing, Aaron Levitt was long the Vanguard Energy ETF (NYSEARCA:VDE), which holds COP, PXD, EOG and OXY.

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