Oil and gas stocks continue to gain steam in the run-up to the 60th presidential election on Nov. 5.
Republicans have held the House since the beginning of the 118th Congress, so should the Republican ticket of Donald Trump and Ohio Sen. JD Vance win, the Republicans will have chances to advance their policy ideas on oil and gas.
A Pew Research Center poll found that 57% of Republicans think the United States should never stop using oil, coal, and natural gas. These attitudes mirror the policy positions of the party as well, which means oil and gas stocks are a potential bonanza if the Republicans wake up to a victory in November.
Even without the policy positions, due to high oil prices and solid finances, the oil and gas business is doing well in 2024 without policy stances. Over $800 billion in free cash flows are predicted from the global upstream industry’s $580 billion hydrocarbon spending. Regulatory changes, including the Inflation Reduction Act in the U.S., will propel these initiatives even further.
The market is expected to grow 16% to $65.8 billion by 2032 from $17.5 billion in 2023. Another estimate puts the market size at $92.76 billion by 2033, owing to increased power consumption and equipment efficiency.
Amid all of this potential and a potential Republican victory, let’s look at three quality oil and gas stocks, two of which are Dividend Aristocrats, each of which comes with double-digit upside and healthy shareholder returns.
Best Oil and Gas Stocks: Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is often the first pick that comes to mind when looking for oil and gas stocks simply because of its size and its status as one of two oil and gas companies on the list of Dividend Aristocrats; upside is 17%.
XOM’s consistent dividend payments in response to a worldwide epidemic that reduced oil prices for two years is commendable. Dividend payments may grow given a 42% pay-our-ratio.
Besides, XOM is changing with the times. In Baytown, Texas, ExxonMobil is manufacturing low-carbon hydrogen and ammonia with aid from Air Liquide. While absorbing over 98% of CO₂ emissions, this project seeks to produce 1 billion cubic feet of low-carbon hydrogen daily and over 1 million tons of ammonia yearly.
ExxonMobil is also purchasing Denbury, another carbon capture, use, and storage firm. ExxonMobil’s low-carbon solutions market capacity will strengthen through this $4.9 billion purchase.
In May, ExxonMobil sold Pioneer Natural Resources. ExxonMobil’s Permian Basin footprint doubles with this acquisition, therefore enhancing its upstream profile.
Furthermore, ExxonMobil and EV battery manufacturer SK On generate mobile lithium in the US. ExxonMobil’s premium performance lubricants and SK On’s battery technologies help to enhance electric vehicle battery home supply chains.
Chevron (CVX)
Chevron (NYSE:CVX) is the second name among oil and gas stocks firmly placed among Dividend Aristocrats, with 37 consecutive years of payout increases; the upside is 16% based on a price target of $183.79.
Having returned $6 billion in the first quarter of 2024 alone, Chevron has routinely paid big cash returns to its stockholders. Paying investors a record $26.3 billion in 2023, Chevron gave $11.3 billion in dividends up 3%.
Most of the news on Chevron today is about the $53 billion merger between Chevron and Hess (NYSE:HES), which is projected to be accretive to cash flow per share by 2025. This projection is based on predicted cost savings and strategic integration of Hess’s significant assets, notably in Guyana and the Bakken Shale. Chevron expects $1 billion in pretax efficiencies the year following the purchase.
Plans to boost its post-acquisition dividend by 8% to $1.63 per share and its share buyback program by $2.5 billion yearly, thereby reaching $20 billion.
Apart from the merger, Chevron is extending its ACES hydrogen initiative to seek low-carbon emission solutions outside of the merger. Furthermore, Chevron, Saudi Aramco, and others are investing in gravity-based power storage technology to provide more reliable electricity.
ConocoPhillips (COP)
ConocoPhillips (NYSE:COP) is another gem among oil and gas stocks in the news for a merger because, under a $22.5 billion all-stock deal, it’s purchasing Marathon Oil (NYSE:MRO), mirroring the oil and gas industry consolidation trend.
The transaction will finalize in Q4 2024 and should save ConocoPhillips $500 million in the first year. ConocoPhillips will gain over 2 billion barrels of reserves and enhance its activities in top basins, including the Bakken, Permian, and Eagle Ford.
Also, in the three years after the purchase, ConocoPhillips wants to buy back more than $20 billion worth of shares. In the first quarter of 2024 alone, ConocoPhillips bought back $1.3 billion worth of shares and gave out $0.9 billion in dividends; small wonder analysts rate COP a “Strong Buy,” projecting an upside of 29% based on a $143.69 target price.
Moreover, ConocoPhillips is working with Sempra Infrastructure (NYSE:SRE) to pursue carbon capture projects and big LNG developments. Among the projects are possible expansion at the Energia Costa Azul LNG facility in Mexico and a carbon capture and storage venture at the Port Arthur LNG plant.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
On the date of publication, Faizan Farooque 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.
