Finding the right energy stocks to buy is worth the time and effort.
The energy sector has long been a favorite among investors looking for steady returns and reliable growth. However, in recent years, the industry has been facing increased pressure from investors and society to become more sustainable. Also, oil and gas’s volatile price behavior critically influences the best energy stocks to buy.
Despite the industry’s challenges, all three of the following energy stocks to buy have been achieving exceptional financial performance and delivering value to shareholders.
This article examines how each company sets the stage for long-term growth while balancing financial performance and sustainability initiatives.
ExxonMobil (NYSE:XOM) is one of the best energy stocks to buy because it’s setting the stage for long-term growth.
With its 2022 financial results showing robust cash flow and strong earnings, the company has made strategic investments in advanced projects that have driven production growth, leading to a total shareholder return of 87% that surpasses its peers.
The company’s ambitious plan through 2027 aims to double earnings and cash flow growth potential compared to 2019, with a projected production of around 4.2 million oil-equivalent barrels daily.
The company commits to $17 billion in lower-emission initiatives, a 15% increase from the previous year’s plan. Exxon also has a share-repurchase plan of $50 billion through 2024 that will maximize shareholder value.
With a strong balance sheet that provides financial flexibility, including the retirement of $7 billion of debt and a reduced net debt-to-capital ratio of 5%, ExxonMobil is well-positioned to continue delivering strong financial performance and sustainable growth for its shareholders.
Despite cost inflation, this is one of the best energy stocks to buy because of the company’s commitment to capital discipline. The company has been paying down debt every quarter and ended the year with a 3% net debt ratio.
Chevron delivers sharholdrer value by returning record annual cash through buybacks and ending the year with a yearly repurchase rate of $15 billion. This aligns with its annual dividend payout increases, positioning 2023 as the 36th consecutive year of dividend growth.
Notably, Chevron’s long-term strategic focus centers on growing its upstream business, which is expected to achieve over a 3% compound annual growth rate for production by 2027. The company’s commitment to connecting natural gas resources to demand is clear in its extensive gas resource of over 175 net Trillion Cubic Feet.
Chevron also aims to be a carbon-efficient energy supplier by lowering upstream carbon intensity towards its 2028 target. It focuses on reducing methane emissions and has tested 13 advanced detection technologies since 2016. Chevron is integrating renewables into its business, developing carbon capture value chains in the US Gulf Coast and Asia-Pacific regions, investing in Svante & Carbon Clean and studying CO2 shipping.
Valero Energy (VLO)
Valero has a 16.63% trailing 12 months return on assets and a 52.46% return on equity. In addition, the company reduced its debt by $2.7 billion, bringing its aggregate debt reduction to $4.0 billion since H2-2021.
Valero’s long-term strategic focus on advancing the future of energy with capital discipline, innovation and unmatched execution has been driving its growth and success.
Valero is also making significant strides in reducing emissions through innovative low-carbon projects. As a result, the company’s comprehensive roadmap is aligned with its strategy, and it is exploring economic paths to reduce carbon intensity.
Valero’s disciplined capital allocation and increased refinery availability make the company the lowest-cost producer, generating significant shareholder returns. The stock offers a dividend yield of nearly 3%, highlighting the company’s commitment to long-term value growth and financial performance.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.