Now might be a great time to look for the best oil stocks to buy.
Expectations of rising Brent crude oil prices for the remainder of 2023 continuing into 2024 are making the search for oil stocks to buy worthwhile again. Brent crude oil comes from the North Sea but its price highly correlates to the oil that flows to the West.
Higher price expectations set the stage for business expansion throughout the sector and, in turn, higher share prices.
Investors reaped strong returns in 2022 as the per barrel price hovered near $100. It is possible that prices rise to those levels again. Current expectations suggest prices should rise through mid-2024 so now is the time to consider which oil stocks to buy.
Exxon Mobil (XOM)
It’s reasonable to argue that Exxon Mobil (NYSE:XOM) and its stock are in as strong a position now as a year ago.
Earnings have fallen across the sector as oil prices have fallen in 2023. However, the company is approaching the new energy paradigm while also preparing to take advantage of rising prices. Let’s address those thoughts in order.
The energy sector is and will continue to face pressure to reduce carbon emissions. Exxon Mobil acquired Denbury (NYSE:DEN) in mid-July. Denbury provides carbon capture and storage solutions and thus complements Exxon Mobil as it pivots toward a future-forward outlook.
Meanwhile, Exxon Mobil is preparing to take advantage of rising prices. Second quarter production reached record levels in the Permian basin and Guyana.
That resulted in refinery throughput reaching its highest Q2 level in the last 15 years. What makes XOM one of the better oil stocks to buy is that it provides stability and income and the scale of the firm means it exercises power that it can use to shape markets.
Chevron (NYSE:CVX) is a comparable stock to XOM. Investors should buy both because they are simply very strong.
A Wall Street Journal article from a month ago reiterated one of the primary things that makes Chevron and Exxon Mobil oil stocks to buy. The companies continue to reward investors richly despite fluctuations in underlying commodity prices.
Cash flows declined by a factor of 3.7 over the last year but shareholder payouts remained stable.
Both firms performed incredibly well in 2022 and that will serve to stabilize each as an investment through 2023. Indications that oil prices may approach 2022 levels in 2024 suggest each form will continue to be very stable.
Chevron is aggressively moving to capture greater volumes and acquired PDC Energy on Aug. 7.
The purchase gives Chevron 275,000 additional acres of potential production in the Denver-Julesburg basin that abuts Chevron’s current operations. All of these factors make CVX shares an easy recommendation at least through mid-2024.
Hess (NYSE:HES) focuses on the exploration and production side of the oil industry.
The stock represents the pursuit of low-cost, high-return energy sources. Thus, Hess benefits if rising prices coincide with successful exploration efforts that identify such energy sources, which is why it’s one of the more intriguing oil stocks to buy.
The company has allocated more than 80% of its $3.7 billion 2023 exploratory budget to securing such sources in Guyana and the Bakken. That investment yielded increased production in those respective geographies.
Second quarter production in Guyana increased from 67,000 barrels of oil equivalent per day to 110,000 boepd year over year. In the Bakken, production increased by 29% to 181,000 boepd.
The company’s exploratory success led to increased production guidance and strongly suggests that the directed E&P investment was appropriate. Those efforts have put Hess in a position that should reward investors who establish a position now as we move into 2024.
Diamondback Energy (FANG)
Diamondback Energy (NASDAQ:FANG) is a smaller firm relative to the others discussed above. That said, its stock is every bit as interesting.
The company is consolidating its assets in order to strengthen operations and increasingly reward investors. Diamondback Energy initiated a non-core asset sale that aimed to produce $1 billion in proceeds. In Q2, proceeds exceeded $1.1 billion, making it one of the more lucrative oil stocks to buy.
In turn, the company has increased the base dividend by 5% while repurchasing $321 million worth of shares in the second quarter.
Diamondback Energy is racing to bring as many wells online as it can. It drilled 156 wells in the first half of 2023 with 98 occurring in Q2. 140 of those wells were completed with 89 brought into production in the second quarter.
The company is an excellent choice for investors focused on west Texas and Permian basin production and a shareholder value focus.
Matador Resources (MTDR)
Matador Resources (NYSE:MTDR) is one of the better oil stocks to buy at the moment. The E&P company is doing better than expected after acquiring Advance Energy Partners in April of this year.
Matador Resources’ daily per barrel oil production was 3% higher than anticipated and a record quarter for the company overall in that regard. The firm attributes the excellent production to its acquisition of Advance Energy Partners.
Further, Matador’s capital expenditures only reached $310 million which was far lower than the $358 million budgeted.
The company is expecting production in the fourth quarter to reach 140,000 barrels of oil per day which would represent a 40% increase on a year-over-year basis. In short, Matador Resources is doing much better than it expected.
That has allowed the firm to give guidance for continued increased production and lower costs. Meanwhile, the company is expanding its midstream operations after successfully piloting those midstream operations at 15 wells earlier.
Chord Energy (CHRD)
Chord Energy (NASDAQ:CHRD) might not be amongst the best-known oil stocks but it offers a lot to investors. Shares are very well regarded by Wall Street and possess high upside based on expectations. Beyond that, Chord Energy also includes a base-plus-variable dividend that yields more than 3% currently. It rises as Chord Energy’s results improve but yields a base payment regardless.
One of the primary reasons to be optimistic about increasing dividends and overall prospects is the company’s guidance. Q2 production levels were at the high end of guidance and will result in improving business as oil prices continue to rise.
The company is also doing what most other energy firms are doing. It is reducing non-core assets while also advancing sustainability initiatives.
Investors should understand that Chord Energy’s oil volumes and natural gas liquids volume performance were both strong relative to Q2 guidance. That has allowed the company to increase guidance which could lead to quick returns quite soon.
Ovintiv (NYSE:OVV) has invested heavily in production in anticipation of rising prices. Investments have yielded greater production which is a primary reason to consider OVV stock at the moment.
The firm increased its capital expenditure from $511 million to $640 during the second quarter. The 25% increase in capital expenditures resulted in a 14.6% increase in total production in the second quarter.
That’s probably not ideal. Neither is the fact that prices fell across the board in Q2 for the oil, NGL, and natural gas that Ovintiv sells.
Yet Ovintiv is in a position to rise simply due to the anticipated increase in prices moving forward. That’s not to say that the company didn’t have bright spots in Q2 as prices declined. It did.
Its costs declined substantially, especially in regard to production where per barrel costs fell from $2.58 to $1.43. Full-year production guidance has been increased and that, along with rising prices, puts OVV in the driver’s seat to reward investors.
On the date of publication, Alex Sirois did not have (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.