PSX - Fill Your Tank: 3 Oil & Gas Stocks Primed to Gush in 2024
2024-03-06 13:38:20 ET
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
To say that market optimism, global production disruptions, and geopolitical tensions are all to blame for the recent spike in oil prices is correct. The rally started because of the risks in the Middle East and Russia and the disruption in global production, but has spread as investors have grown more bullish on commodities, generally.
Recent declines in oil prices appear to be due to technical factors. That said, in early 2024, supply disruptions and ongoing geopolitical threats might sustain oil prices. For those who remain more bullish than bearish on black gold, here are three slick oil and gas stocks to consider to fuel up your portfolio.
Devon Energy (DVN)
U.S. oil and gas producer Devon Energy (NYSE: DVN ) is actively considering buying Enerplus (NYSE: ERF ) for $3 billion. Despite a 43% decline in free cash flow because of declining natural gas prices, DVN’s earnings blew past estimates in Q3.
The company is now targeting further production growth in Q4. It will be even higher than expected at 640-660 MBOE/d (thousand barrels of oil equivalent per day), with capital expenditures coming in at $870-$930 million. Devon Energy is set on improving its capital efficiency. Specifically, DVN focuses on investing in Delaware assets and core operations, even with shares trailing behind its peers.
This sort of relative discount has invited a number of institutional investors to the party. Recent Securities and Exchange Commission ( SEC ) filing shows that Acadian Asset Management LLC boosted its ownership of Devon Energy by 66.9% in Q3. The fund had $738,00 worth of 15,508 shares. Other hedge funds, like Blair William & Co. and AlphaCrest Capital Management LLC shifted into DVN stock. Furthermore, the Canada Pension Plan Investment Board and Sei Investments Co. increased their interests in this energy player.
Therefore, this strong buying activity ought to have retail investors intrigued at this current juncture.
Occidental Petroleum (OXY)
Occidental Petroleum (NYSE: OXY ) is a unique energy company, in that it has Warren Buffett as a key shareholder. Currently, Buffett holds around 28.5% of the $53 billion energy giant, as per the company’s most recent 13-F filings.
One of the reasons the Oracle of Omaha appears intent on holding this stake is optimism over Occidental’s Permian Basin presence . Recent acquisitions, like the $12 billion CrownRock deal, position the company well for growth. Over time, it’s clear large investors are looking for the best players in the most productive corners of the energy market. Right now, Occidental Petroleum has to be in this discussion.
The company’s mix of high-performing energy assets, as well as the company’s leadership in carbon capture (signified by the SRATOS project in Texas), suggests plenty of upside ahead. Personally, I think just knowing Buffett is a major shareholder is more than enough for most investors. The thesis is really simple with this energy giant.
Phillips 66 (PSX)
Although Philips 66 (NYSE: PSX ) outpaced the market with a 65% increase over the past three years, its most recent one-year return (including dividends) was only 41%. Its long-term performance, when compared to corporate growth, shows shifting market sentiment. Even though the company may lose money in the near-term, any sort of bottom-line improvement usually corresponds with higher share prices.
Philipps 66 last traded at $146.10 per share , and has been moving in the right direction over the past year. Indeed, any stock that can deliver returns in excess of 40% is worth considering. Much of this positive view around Phillips 66 can be tied back to the company’s diversified and vertically-integrated business model.
In the energy sector, investors prize cash flows and earnings above all else. Accordingly, PSX still looks attractive after this recent surge, trading at less than 10-times earnings.
If there’s more bottom-line growth on the horizon, Phillips 66 is one with plenty of room to run further.
On the date of publication, Chris MacDonald 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 .
Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.
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