SPECIAL REPORT The Top 7 Stocks for 2024

3 Energy Stocks With Strong Balance Sheets and Low Debt

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  • Put your capital to work in energy stocks that have strong financial health
  • Chevron (CVX): Chevron is one of the healthiest energy firms in existence.
  • Exxon Mobil (XOM): Exxon Mobil is a lot like Chevron, but their acquisitions differ of late.
  • Devon Energy (DVN): Devon Energy is financially healthy even though it’s cash poor.
energy stocks with strong balance sheets - 3 Energy Stocks With Strong Balance Sheets and Low Debt

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Whether it is with energy stocks, or any other sector, investors are often told to look for companies with strong balance sheets. Balance sheets include assets on one side and liabilities on the other. Generally speaking, more assets than liabilities is an easy litmus test by which to gauge financial health.  It’s logical. Own more than you are responsible for and you’ll be better off. It applies to humans and corporations equally. 

Strong balance sheets are often marked by ample cash as well. The more cash available, the more leverage a given company has in general. Energy firms with more equity than debt and ample cash are those that are financially healthiest. They’re also good choices for investment for those reasons. 

Chevron (CVX)

Chevron Earnings: CVX Stock Sinks Amid Spending Cuts
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Chevron (NYSE:CVX) is, in general, an excellent choice for investors considering adding energy stocks to their portfolios. It’s large, stable, provides income via dividends and is a great bet on the continued importance of oil to the economy. 

Its strength is reflected in a strong balance sheet that suggests CVX shares continue to be a reasonable choice overall. So, let’s look at those numbers and what they tell us. 

The most basic and informative metric for financial health is debt to equity. The lower the ratio, the better. Chevron’s debt on Sept. 30 stood at $20.559 billion. Equity stood at $165.265 billion. That equates to a debt-to-equity ratio of 12.4% which is very low relative to other firms in the energy sector.

In short, Chevron is financially very healthy even after its all stock deal to acquire to acquire Hess (NYSE:HES). 

Exxon Mobil (XOM) 

A view of a well-lit Exxon Mobil gas station in Pasadena, CA during nighttime. representing exxon mobil stock
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Exxon Mobil (NYSE:XOM) is very similar to Chevron in many regards. Most of the reasons an investor would buy Chevron also apply to Exxon Mobil. That includes a strong balance sheet as well.

Metrics-based website Gurufocus has a lot of quick and easy ratios at hand. The debt-to-equity ratio listed there for Exxon Mobil is 0.21. That places Exxon Mobil squarely in the top third of companies by that measurement. However, when I viewed Exxon Mobil’s balance sheet I found slightly different numbers for that ratio. Debt stands at $36.5 billion while equity sits at $207.5 billion. That equates to 17.5% suggesting that the company is slightly healthier than gurufocus states. 

Whatever the case, the company’s cash balance increased by $3.3 billion during the most recent quarter and stands at $32.97 billion overall. Exxon Mobil is also in acquisition mode and finalized its acquisition of Denbury on Nov. 2 strengthening its low carbon solutions business overall.  

Devon Energy (DVN)

The logo for Devon Energy (DVN) is displayed on a sign outside an office.
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Devon Energy (NYSE:DVN) is a North American E&P firm that is financially healthy overall. Among the three firms discussed here it’s the least healthy but overall is still in good shape. 

Devon Energy is also unique relative to those firms for its dividend structure. The company pays a base plus variable dividend that rewards investors when operations are strong. 

The primary reason Devon Energy is considered to be the least healthy among the firms discussed here relates to its cash position. Devon Energy doesn’t have much cash on hand and that makes its cash-to-debt ratio quite low overall. Outside of that metric, Devon Energy is financially strong. All of the other ratios I’ve discussed here are fine for the company. 

The company carries $2.669 billion in long term debt which is much lower than the $11.15 billion of equity in the company. Devon Energy is a great choice for investors seeking variable income and financial health in an energy stock.  

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.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.


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