Finding the best oil stocks to buy isn’t as easy as it was in the first half of the year. The price of crude oil ran up to a multiyear high of $120 a barrel in the spring shortly after Russia invaded Ukraine. However, oil prices steadily fell over the summer months as concerns grew about the prospects of a global recession and waning energy demand. September proved to be the worst month of the year for oil stocks as crude prices dropped to around $80 a barrel.
Recently, though, oil prices have once again been marching higher after the Organization of Petroleum Exporting Countries and its allies announced that they plan to cut oil output by as much as 2 million barrels a day. As of this writing, West Texas Intermediate crude oil, the U.S. standard, is trading right around $92 a barrel. Brent crude oil, the international benchmark, is hovering near $98 per barrel.
Oil stocks, which also declined over the summer, are again ticking higher along with crude prices. This presents a potential opportunity for investors to step on the elevator and ride oil stocks higher as we head into the colder winter months when energy demand typically spikes.
Here are seven of the best oil stocks to buy now.
|CNQ||Canadian Natural Resources||$61.25|
Best Oil Stocks to Buy Now: ExxonMobil (XOM)
ExxonMobil (NYSE:XOM) is benefitting from elevated energy prices across the board this year. On Oct. 28, the integrated oil and natural gas company reported a record profit for this year’s third-quarter, causing analysts and investors to cheer. The Texas-based company said it earned a record $18.7 billion in Q3, up 177% from the same period a year earlier. Its earnings per share of $4.45 blew past analysts’ average $3.79 forecast, according to Refinitiv’s data.
The Q3 print was the latest in a string of record-breaking earnings for America’s largest oil company. The outperformance has sent XOM stock up 85% in 2022 to $113 a share. The stock is currently trading near its 52-week high of $113.50. If the company manages to keep its quarterly profits flowing, the upward momentum of its stock should continue as well.
Another great attribute of XOM stock is that it is a Dividend Aristocrat. Specifically, ExxonMobil has increased its dividend payout to shareholders for 39 consecutive years. The company currently pays a quarterly dividend of 91 cents per share, and its current yield stands at 3.2%.
Devon Energy (DVN)
Oklahoma City-based Devon Energy (NYSE:DVN) is a good pick right now because the company is not just a leading oil company, it is also a major producer of natural gas and natural gas liquids at a time when those energy products are in high demand, particularly in Europe.
The U.S. struck a deal with the European Union earlier this year aimed at reducing the bloc’s reliance on natural gas from Russia. The U.S. has promised to provide Europe with at least 15 billion cubic meters more of liquified natural gas by year’s end. The goal of the deal is to wean European countries such as Germany and France off natural gas that comes from Russia. Previously, about 40% of Europe’s energy came from Russia.
The new pact focused on natural gas is good news for Devon Energy. At the end of last year, natural gas liquids accounted for 27% of the company’s reserves, with natural gas accounting for another 29%. Natural gas prices have risen along with crude oil prices, with gas prices up 65% so far this year. And analysts are calling for continued increases of gas prices leading into the winter when the demand for gas is expected to peak.
DVN stock is up 61% so far this year but sits 11% below its 52-week high of $79.40. The shares are likely to continue to climb along with rising energy prices.
There are a couple of reasons for investors to consider buying shares of S California-based Chevron (NYSE:CVX). First, the company just reported a net profit for the third quarter of $11.2 billion, its second-highest quarterly profit ever.
Second, while CVX stock is up 58% on the year and trading near its 52-week high at $186.38, the shares still do not look overvalued with a price-earnings ratio of only 10.5 and a market capitalization of nearly $360 billion. Lastly, the company pays a quarterly dividend of $1.42 a share for an attractive 3.10% yield.
Chevron’s Q3 net profit of $11.2 billion equaled $5.78 per share, nearly double the $6.1 billion that it achieved in the same quarter of 2021, and ahead of the average Wall Street EPS estimate of $4.86.
The blockbuster earnings have led analysts across Wall Street to revise their forecasts and ratings on CVX stock throughout the year. Credit Suisse, for example, maintains an “outperform” rating on the stock and a price target of $202, implying 10% gains from itscurrent levels. Chevron has also boosted its share buybacks this year, lifting them to $15 billion.
Best Oil Stocks to Buy Now: BP (BP)
BP (NYSE:BP) is another oil producer whose stock is looking very attractive right now. Its shares are up 27% on the year and trading near $34. Still, the stock has a low forward P/E ratio of about 5. And its dividend yields a very attractive 4.25%.
Based in London, BP is one of the energy “supermajors” with trailing annual revenue of more than $200 billion, 60,000 employees, and a market capitalization approaching $106 billion.
BP has hiked its quarterly dividend to 36 cents per share following exceptional earnings. The company announced that its Q3 net profit this year more than doubled from a year earlier to $8.2 billion. In addition to hiking its dividend, BP has been buying back stock with a vengeance, recently announcing that it is boosting its share buybacks by $2.5 billion to further reward shareholders.
Marathon Oil (MRO)
Another diversified energy company that deals in natural gas as well as oil products is Marathon Oil (NYSE:MRO). A direct descendant of John D. Rockefeller’s Standard Oil Company, Houston-based Marathon Oil is one of America’s preeminent energy companies.
Shares have skyrocketed 90% to $32.50 this year as the price of crude oil has risen and global demand for natural gas has surged. In addition to the share price appreciation, other reasons to like MRO stock include its 1.12% dividend yield, $3 billion stock buyback program, and low P/E ratio of 6.16. Plus, Wall Street analysts, on average, forecast that the company’s earnings will more than triple this year, pushed higher by oil and natural gas prices that are expected to rise into the winter months.
Marathon Oil’s latest earnings certainly didn’t disappoint anyone on Wall Street. The company announced Q3 net income of $832 million, or $1.24 per share, up 168% from $310 million, or 39 cents a share, a year earlier. Analysts’ average forecast called for earnings of $1.19 per share, according to Refinitiv data.
Marathon also announced that it was acquiring Ensign Natural Resources’ Eagle Ford assets for $3 billion in a deal that’s expected to close by year’s end.
Best Oil Stocks to Buy Now: Occidental Petroleum (OXY)
Houston-based Occidental Petroleum (NYSE:OXY) has gotten a lot of attention this year as the new favorite stock of famed value investor Warren Buffett. A relentless deal hunter, Buffett says he is always on the lookout for strong businesses and undervalued stocks, and, when he finds the right combination, he buys shares with a purpose.
Well, Buffett seems to have found a deal in OXY stock. The Oracle of Omaha has been buying shares of the U.S. oil company hand over fist since the spring. His total investment now stands at 188.4 million shares, or 20.2% of the company, worth $11.3 billion.
Buffett no doubt likes that OXY stock has more than doubled in 2022, up 159% in 2022, making it one of the best-performing stocks in the S&P 500. He also certainly likes Occidental Petroleum’s low P/E ratio of 7.40.
While the quarterly dividend yields a skimpy 0.71%, Buffett probably likes that Occidental reinvests its profits in its business in the same way that his holding company, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), does (Buffett’s company pays no dividend to its shareholders).
Also like Berkshire, Occidental Petroleum is using its profits to buy back its own stock, most recently announcing a $3 billion share repurchase program.
Canadian Natural Resources (CNQ)
Looking north to Canada, we have Canadian Natural Resources (NYSE:CNQ). The Calgary-headquartered company recently announced that it was raising its quarterly dividend by 13% following its strong third-quarter earnings.
The oil and natural gas company said that it will now pay a quarterly dividend of 85 Canadian cents , up from its previous dividend of 75 Canadian cents per share.
Like most oil and natural gas producers, Canadian Natural Resources has been gushing profits this year as energy prices soar. The company most recently announced a third-quarter profit of 2.81 billion Canadian dollars, up from 2.20 billion Canadian dollars a year earlier. Also like other oil companies, Canadian Natural Resources share price has risen sharply this year, up 42% to $61.17. CNQ stock has a low P/E ratio of 8.20.
The company also pays a quarterly dividend that yields a healthy 4.1%. By way of comparison, the average dividend yield among companies listed on the S&P 500 index is 1.3%.
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.