There’s trouble brewing in the oil patch. Prices for crude oil in America are below $75 a barrel and at their lowest level in six months amid growing fears of a recession in the U.S. economy. West Texas Intermediate (WTI) crude oil, the U.S. standard, was trading as low as $71.92 a barrel on Aug. 5, though it has since rebounded to around $73 per barrel.
WTI crude has now erased all of its gains for the year and is trading at its lowest level since the winter months, as markets anticipate that the U.S. economy may slide into a recession. Brent crude oil, the international standard, is trading at $76 a barrel and in negative territory on the year.
The selloff in energy prices comes after U.S. job and manufacturing data surprised to the downside, prompting recession fears. A recession is typically defined as two consecutive quarters of economic contraction. The weak U.S. data comes as an economic downturn in China worsens, hurting energy demand. China is the world’s biggest importer of crude oil.
Amid the chaos, opportunities are arising for investors to take positions in leading oil and gas stocks and eventually ride them to future profits. Here are the top three oil and gas stocks to buy now: summer 2024.
BP PLC (BP)
BP PLC (NYSE:BP) looks like a good bet among oil and gas stocks after the global energy giant raised its quarterly dividend payment to shareholders by 10% and reported a better-than-expected profit for this year’s second quarter. Going forward, BP will pay a quarterly distribution of 8 cents per share, up from 7.27 cents previously. The dividend increase gives BP stock a strong yield of 5.42%.
The company also continues to reward shareholders with stock buybacks, pledging to repurchase $1.75 billion of its own stock during the current third quarter. The dividend hike and stock buybacks were announced by BP along with decent Q2 financial results. The company announced a profit of $2.80 billion, which beat Wall Street forecasts of $2.60 billion. Revenue of $47.30 billion came in below a consensus estimate of $50.94 billion.
However, BP is reigning in costs, with CEO Murray Auchincloss imposing a hiring freeze and halting renewable energy projects as part of cost-cutting efforts. BP stock is down 6.7% on the year and trading at only 13 times future earnings estimates
ExxonMobil (XOM)
U.S. oil giant ExxonMobil (NYSE:XOM) had arguably the best Q2 print of any of the major energy companies, with results lifted higher by record production in Guyana and the Permian Basin of Texas. ExxonMobil announced Q2 EPS of $2.14, which handily beat the $2.01 forecast on Wall Street. Sales of $93.06 billion topped consensus estimates that called for $90.99 billion.
The company said that its Q2 earnings got a boost from its $60 billion acquisition of Pioneer Natural Resources, with that deal closing in May of this year. ExxonMobil said that its production grew 15% to 4.4 million barrels of crude oil per day during Q2, driven by record output in Guyana and Texas. ExxonMobil too is keeping its shareholders in mind, spending $4.30 billion on dividends and $5.20 billion on stock buybacks during Q2.
XOM stock is up 10.2% this year and showing strength among oil and gas stocks, outperforming nearly all other oil producers.
Chevron (CVX)
For a buy-the-dip candidate, consider U.S. oil major Chevron (NYSE:CVX). The company’s stock is down 6.7% over the last 12 months, including a 1.9% pullback this year. Chevron’s stock has fallen due to a downturn in the market as well as mixed Q2 financial results that showed lower refining margins at the company. Chevron stock is now trading at 13 times future earnings estimates and offers shareholders a quarterly dividend payment of $1.63, giving it a yield of 4.50%.
Chevron reported Q2 EPS of $2.55, which missed Wall Street forecasts of $2.93. However, revenue of $51.18 billion beat the consensus expectation of $50.80 billion and sales were up 5% from a year earlier. Refining margins continue to be challenged, as does Chevron’s proposed $53 billion acquisition of Hess Corp. (NYSE:HES), which looks unlikely to close before mid-2025. These are short-term headwinds for what has proven to be a long-term winner for shareholders. As such, CVX stock is worth considering among oil and gas stocks.
On the date of publication, Joel Baglole 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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
