While still above the low for the year, crude oil prices continue to swing wildly. A little more than a week ago, crude prices were nearly $95 a barrel. As of this writing, they are below $85. That has caused some near-term volatility in the stocks of energy producers. Regardless, investors should be prepared for dramatic increases in the third-quarter financial results of oil and natural gas producers when they report in the coming weeks, buoyed by the spike in crude prices seen in September. Shareholders from most oil majors are still benefitting from record profits in 2022 when crude prices peaked at $122 per barrel. Where we go from here is anyone’s guess, but energy stocks once again look exciting. Here are Q4 stock predictions: three energy stocks ready to roar into 2024.
Occidental Petroleum (OXY)
In addition to being one of Warren Buffett’s favorite stocks, Occidental Petroleum (NYSE:OXY) is also a leading energy company that has been making some interesting moves lately. The oil major recently bought Canadian start-up Carbon Engineering for $1.1 billion as it ramps up its efforts to remove carbon dioxide from the atmosphere. Occidental is paying cash for privately held Carbon Engineering and expects the deal to close by year’s end.
Occidental partnered with Carbon Engineering for the last four years, using its technology to develop its Texas-based Stratos project, set to become the world’s largest carbon dioxide capture plant by 2025. Carbon capture is one of the energy industry’s favorite climate solutions. The U.S. government is offering generous tax incentives for the technology through the federal Inflation Reduction Act, which Occidental Petroleum should benefit from. OXY stock is down 3% year to date.
Shell (SHEL)
Shareholders of Shell (NYSE:SHEL) have benefitted greatly from the company’s gushing 2022 profits. The international oil giant announced in recent months that it is buying back $3 billion of its own stock. The share repurchase is on top of the company raising its quarterly dividend payment to stockholders by 15%. While Shell’s earnings have taken a hit due to lower crude oil prices, the company has certainly given shareholders plenty of reasons to remain invested.
Shell’s dividend yield now stands at 4.11%. Moving forward, the company said it will increase its shareholder distribution to between 30% and 40% of free cash flow from operations, up from 20% to 30% previously. The showering of gifts onto investors comes despite Shell reporting a 56% decline in its Q2 profit to $5 billion. With crude prices rebounding, reaching nearly $95 a barrel in Q3, Shell can be expected to continue focusing on dividends and buybacks. SHEL stock is up 12% so far in 2023.
Exxon Mobil (XOM)
Occidental Petroleum isn’t the only company focusing on carbon capture. In July, Exxon Mobil (NYSE:XOM) agreed to buy CO2 pipeline operator Denbury for $4.9 billion as it looks toward a clean energy future too. As with other energy companies, Exxon has seen its profits come down from the record levels seen in 2022 as crude oil prices softened in this year’s first half. For Q2 this year, the company reported its profit was cut in half from a year ago, while its revenues declined 28%.
However, investors can find encouragement in the fact that apart from last year’s record-setting second quarter, Exxon Mobil posted its strongest earnings for the April through June period in more than a decade. As with Shell, Exxon is focused on ensuring that its stockholders benefit from its impressive earnings during 2022. The company distributed $8 billion in cash to shareholders in Q2 of this year alone, including $3.7 billion in dividend payments. XOM stock has increased 2% year to date.
On the date of publication, Joel Baglole 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.
