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In the ever-evolving landscape of energy investments, oil stocks continue to play a crucial role in many investors’ portfolios. As we navigate through 2024, it’s essential to identify the most promising opportunities in the oil sector.

Key Takeaways:

• ConocoPhillips (NYSE:COP) emerges as a leader in operational efficiency and strategic acquisitions
• Devon Energy (NYSE:DVN) impresses with its strong dividend yield and focus on U.S. shale production
• Enbridge (NYSE:ENB) offers stability through its diversified energy infrastructure portfolio
• ExxonMobil (NYSE:XOM) maintains its position as an industry giant with significant upstream and downstream operations
• Phillips 66 (NYSE:PSX) showcases strength in refining and marketing, with a growing focus on renewable fuels

Global Oil Market Growth:

• The crude oil market was valued at approximately $2,829.69 billion in 2023 and is expected to grow to $2,998.39 billion in 2024, reflecting a compound annual growth rate (CAGR) of 6.0%. By 2028, the market size is projected to reach $3,655.81 billion, with a CAGR of 5.1% during this period. thebusinessresearchcompany
• The global crude oil market, valued at $1,450.01 billion in 2023, is projected to expand to $1,642.88 billion by 2030, at a CAGR of 1.8%. maximizemarketresearch

Performance Comparison of Top Oil Stocks

The 5 Best Oil Stocks to Watch

The companies we have listed are based on hedge fund interest, using data from Insider Monkey’s Q2 2024 report.

1. ConocoPhillips (NYSE:COP)

Number of Hedge Fund Holders (Q2 2024): 74

ConocoPhillips, a Houston-based independent exploration and production powerhouse, boasts a global presence across 17 countries. This energy giant excels in exploring, producing, transporting, and marketing crude oil, bitumen, natural gas, and related products worldwide. Its operations are strategically divided into six geographic segments: Alaska, Lower 48, Canada, Europe and North Africa, Asia Pacific and Middle East, and Other International.

According to insidermonkey, Eagle Capital Management, led by Boykin Curry, holds a significant stake in ConocoPhillips (NYSE:COP). Their investment of 14,515,149 shares is valued at approximately $1.66 billion.

ConocoPhillips reported strong second-quarter 2024 results, with earnings and adjusted earnings of $2.3 billion, or $1.98 per share, compared to $2.2 billion, or $1.84 per share, in Q2 2023. The company also announced an agreement to acquire Marathon Oil in an all-stock transaction, marking a significant strategic move.

Production reached 1,945 MBOED company-wide, with Lower 48 contributing 1,105 MBOED. Notable operational milestones included early production at Eldfisk North in Norway and progress on the Willow project in Alaska. The company also advanced its global LNG strategy with new agreements in Belgium and Asia.

ConocoPhillips maintained its commitment to shareholder returns, distributing $1.9 billion through share repurchases and dividends. Cash provided by operating activities was $4.9 billion, and the company ended the quarter with a strong balance sheet, including $6.3 billion in cash and short-term investments.

Why We Picked ConocoPhillips:

We chose ConocoPhillips for its strong operational efficiency and diverse asset portfolio. The company’s focus on low-cost production positions it well to maintain profitability even in challenging price environments. Additionally, ConocoPhillips’ commitment to returning capital to shareholders through dividends and buybacks makes it an attractive option for income-focused investors.

2. Devon Energy (NYSE:DVN)

Number of Hedge Fund Holders (Q2 2024): 52

Devon Energy Corporation is a major oil and natural gas company founded in 1971 by the Nichols family. Based in Oklahoma City, Devon focuses on exploring, developing, and producing energy resources. Its operations span key areas like the Delaware Basin, Eagle Ford, Barnett Shale, STACK, and Rockies Oil.

According to insidermonkey, D. E. Shaw holds a significant stake in Devon Energy (NYSE:DVN), owning 5.29 million shares valued at approximately 250.54 million dollars.

Devon Energy’s second-quarter 2024 results show robust financial performance. The company reported net earnings of $844 million, or $1.34 per diluted share. Core earnings, adjusted for certain items, reached $885 million, or $1.41 per diluted share. Operating cash flow increased by 9% year-over-year to $1.5 billion, generating $587 million in free cash flow after covering capital requirements.

Devon’s financial position strengthened further, with cash balances hitting $1.2 billion and outstanding debt at $6.1 billion. The net debt-to-EBITDAX ratio stood at 0.6 times. In light of these results, Devon declared a fixed-plus-variable dividend of $0.44 per share, split equally between fixed and variable components, payable on September 30, 2024.

According to Wall Street Analyst on DVN stock. Of the 32 analysts following the stock, 19 give it a Buy and 10 has it at Hold.

Why We Picked Devon Energy:

Devon Energy made our list due to its leadership in U.S. shale production, particularly in the Permian Basin. The company’s innovative variable dividend policy sets it apart, allowing investors to benefit directly from periods of higher oil prices. Devon’s strong focus on ESG initiatives also aligns with growing investor preferences for environmentally responsible energy companies.

3. Enbridge (NYSE:ENB)

Number of Hedge Fund Holders (Q2 2024): 32

Enbridge operates North America’s largest liquids pipeline system, transporting 30% of crude oil production and boasting 1.6 MMbpd of export capacity. Its gas transmission network delivers 20% of U.S. natural gas consumption, serving over 170 million people. Recent U.S. acquisitions will make Enbridge the continent’s largest natural gas utility, delivering 9.3 Bcf/d to about 20 million customers.

The company’s diverse portfolio includes significant investments in renewable energy, with 5.3 GW of global capacity serving 5.7 million people. Enbridge’s assets span 23 wind farms, 14 solar facilities, 18 renewable natural gas plants, 2 hydrogen facilities, 3 other lower-carbon assets, and an LNG facility, positioning it as a leader in both traditional and clean energy sectors.

According to insidermonkey, GQG Partners, led by Rajiv Jain, holds a $1.81 billion position in Enbridge (NYSE:ENB), consisting of 50,897,110 shares.

Enbridge’s second quarter of 2024 showed robust financial performance, with GAAP earnings of $1.8 billion and adjusted EBITDA of $4.3 billion, an 8% increase year-over-year. The company reaffirmed its growth outlook and updated its 2024 financial guidance to include recent acquisitions.

Notable developments include the closure of the Questar acquisition for $4.3 billion and the announcement of the Blackcomb Pipeline project. Enbridge also sanctioned the Orange Grove solar farm and a significant expansion of the Gray Oak Pipeline.

The company’s strategic moves, including the completion of acquisition funding and the termination of its ATM equity issuance program, demonstrate a return to an equity self-funded model. With a Debt-to-EBITDA ratio of 4.7x, Enbridge anticipates strengthened financial positioning from its recent $14 billion in acquisitions.

According to Wall Street Analyst on ENB stock. Of the 21 analysts following the stock, 8 give it a Buy, 7 has it at Hold and 2 calls it a Sell.

Why We Picked Enbridge:

We selected Enbridge for its stable revenue stream from midstream operations, which are less sensitive to oil price fluctuations. The company’s extensive pipeline network and growing renewable energy portfolio provide diversification and long-term growth potential. Enbridge’s consistent dividend growth and attractive yield further enhance its appeal to investors.

4. ExxonMobil (NYSE:XOM)

Number of Hedge Fund Holders (Q2 2024): 92

ExxonMobil, a global energy and chemical giant founded in 1882, employs 62,000 people and uses cutting-edge technology to meet energy demands responsibly. With $36B earnings in 2023, it boasts 41 years of dividend growth and $32.4B in shareholder distributions. The company achieved 15% return on capital and shareholder return CAGR since 2019, while reducing greenhouse intensity by over 10% compared to 2016.

According to insidermonkey, Ken Fisher’s Fisher Asset Management holds 28.25 million ExxonMobil shares, valued at $3.25 billion.

ExxonMobil’s second-quarter 2024 results reflect a mixed financial landscape. The company reported year-to-date earnings of $17.5 billion, down from $19.3 billion in the same period last year. This decrease was primarily due to lower refining margins and natural gas prices, although crude prices saw a modest increase.

Despite these challenges, ExxonMobil achieved significant growth in key areas. Record production in Guyana and the Permian Basin, along with the Beaumont refinery expansion, helped offset volume losses from asset divestments and government-mandated curtailments. The company also made progress on its cost-saving initiatives.

Looking ahead, ExxonMobil is maintaining a strong financial position. With a debt-to-capital ratio of 14% and substantial cash reserves, the company plans to increase its share repurchase program to $20 billion annually through 2025. Additionally, ExxonMobil declared a third-quarter dividend of $0.95 per share, payable in September 2024.

According to Wall Street Analyst on XOM stock. Of the 29 analysts following the stock, 11 give it a Buy and 14 has it at Hold.

Why We Picked ExxonMobil:

ExxonMobil’s inclusion is based on its vertically integrated business model and significant investments in low-carbon technologies. As one of the largest publicly traded energy companies, ExxonMobil offers investors exposure to all segments of the oil and gas industry. The company’s financial strength and history of navigating industry cycles make it a cornerstone holding for many energy-focused portfolios.

5. Phillips 66 (NYSE:PSX)

Number of Hedge Fund Holders (Q2 2024): 34

Phillips 66, a major energy company spun off from ConocoPhillips in 2012, operates across various sectors including refining, midstream, chemicals, and marketing. Based in Houston, Texas, it has grown into a significant industry player with a market cap of $55.74 billion. The company’s diversified portfolio positions it strongly in the global energy market.

According to insidermonkey, Harris Associates, under Natixis Global Asset Management, holds a significant stake in Phillips 66. Their investment comprises 8.45 million shares, valued at approximately $1.19 billion.

Phillips 66 reported first-quarter 2024 earnings of $748 million, or $1.73 per share. Adjusted earnings were $822 million, or $1.90 per share. The company returned $1.6 billion to shareholders through dividends and share repurchases, while operating at 92% crude utilization. A 10% increase in quarterly dividend to $1.15 per share was announced.

The company made progress on its strategic priorities, returning $9.9 billion to shareholders since July 2022. Phillips 66 is on track to achieve $1.4 billion in business transformation savings by year-end 2024. It also launched a process to divest retail marketing assets in Germany and Austria.

CEO Mark Lashier highlighted the startup of the Rodeo Renewable Energy Complex, positioning Phillips 66 as a leader in renewable fuels. Despite maintenance challenges in Q1, the company is now operating near historical highs and is prepared for peak summer demand. Phillips 66 remains committed to increasing shareholder value and meeting its 2025 adjusted EBITDA target.

According to Wall Street Analyst on PSX stock. Of the 21 analysts following the stock, 11 give it a Buy and 5 has it at Hold.

Why We Picked Phillips 66:

We chose Phillips 66 for its strong position in refining and marketing, as well as its growing midstream and chemicals businesses. The company’s strategic investments in renewable fuels and electric vehicle charging infrastructure demonstrate its adaptability to changing energy landscapes. Phillips 66’s balanced approach to traditional and emerging energy markets provides investors with exposure to both current and future energy trends.

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The Role of OPEC+ in Shaping Oil Markets

OPEC+, a coalition of oil-producing nations formed in 2016, has become a significant force in global oil markets. Led by Saudi Arabia and Russia, the group represents about 41% of worldwide oil production. By coordinating output among its members, OPEC+ aims to stabilize prices and ensure fair returns for producers.

The coalition has shown its ability to respond swiftly to market volatility. In 2020, it implemented substantial production cuts to address the demand drop caused by the COVID-19 pandemic. Since then, OPEC+ has continued to adjust production levels to maintain market balance.

Despite its current influence, OPEC+ faces challenges from the rise of alternative energy sources and global sustainability efforts. As the world transitions to cleaner energy, the group’s impact may wane. However, for now, OPEC+ remains a crucial player in shaping oil prices and market stability.

Conclusion

As we look ahead to the remainder of 2024 and beyond, the oil stock market presents a complex but potentially rewarding landscape for investors. The top 5 oil stocks highlighted in this article – ConocoPhillips, Devon Energy, Enbridge, ExxonMobil, and Phillips 66 – represent a diverse range of opportunities within the sector.

FAQs

1. How do oil price fluctuations affect oil stock performance?

Oil stock prices are generally correlated with oil prices, but the degree of impact can vary. Integrated majors with diverse operations may be less affected by price swings compared to pure-play exploration and production companies.

2. What role do dividends play in oil stock investments?

Many oil companies offer attractive dividend yields, making them popular among income-focused investors. However, it’s important to assess the sustainability of dividend payments, especially during periods of low oil prices.

3. How are oil companies addressing environmental concerns?

Many oil companies are investing in renewable energy, carbon capture technologies, and improving the efficiency of their operations to reduce their environmental impact. Some are also setting targets for reducing their carbon footprint.

4. What impact does the shift towards electric vehicles have on oil stocks?

The growing adoption of electric vehicles could potentially reduce long-term demand for gasoline. However, oil companies are adapting by investing in EV charging infrastructure and diversifying into other petrochemical products.

5. How can investors gauge the financial health of oil companies?

Key metrics to consider include debt-to-equity ratios, free cash flow generation, production costs, and reserve replacement rates. Additionally, assessing a company’s ability to maintain profitability at various oil price points can provide insights into its financial resilience.