It’s no longer a matter of “if” oil prices will rebound, but “when.” Although the weak energy market continues to drag along, it’s tough to ignore the potential value in a large-cap oil major like BP plc (ADR) (NYSE:BP), which pays a one of the best energy yields on the market at 6.83%. For some context, you would have to own three S&P 500 stocks to achieve that same yield.

BP stock closed Monday at $35.09, having declined 6.13% year to date while the S&P 500 index gained 5%. Lingering concerns about global oil glut continue to pressure the commodity’s price, causing a recent selloff in energy-related stocks, including the likes of Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX).

As such, BP stock has fallen 5.4% and 4.3% in the last three months and six months, respectively. But with some patience, BP stock can still return some 20%, reaching $42 per share. This is because, unlike some of its peers, BP — the third-largest publicly traded oil company in the world by revenue — has enough resources to withstand continued market volatility, including a cash hoard of about $23.5 billion.

Indeed, with oil prices now hovering near $50 per barrel, BP needs prices to be $10 higher near $60 per barrel, which is its break-even point. To that end, the company has done a solid job focusing on what it can control, including rebalancing operations, cutting costs and strengthening its portfolio. The company is also expanding natural gas operations, which will give it a buffer to grow revenue even during a weak oil market.

Natural gas is expected to account for 60% of its portfolio by 2025. The company expects to achieve this with three important gas projects, located in the Caspian Sea, in Oman and in offshore Egypt. Still, the disparity between BP’s break-even point and current oil prices has kept investors on the sidelines. They are, however, ignoring that during the fourth quarter BP posted an underlying profit from its upstream production segment for the first time in several quarters.

From my vantage point, you would be hard-pressed to find a better bargain in the energy sector with a combination of value and dividend.

Bottom Line for BP Stock

Thanks to a combination of cost cuts and higher oil prices, BP’s profit margins, particularly in its upstream business, should rise in the quarters ahead. And with the company still investing for future growth with natural gas projects, BP stock, which deserves a higher valuation, should rise to $42 per share, delivering 20% returns.

As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.