Oil stocks continue to demonstrate their resilience. Their performance during the bear market of 2022 was noteworthy, particularly as inflation and geopolitical unrest in Ukraine drove crude oil prices higher. Consequently, the top oil stocks thrived, even as the S&P 500 index receded.
However, the scenario in 2023 is quite the opposite, with oil prices down dramatically from their 2022 peak of $120 per barrel. However, the most robust among them have managed to navigate these choppy waters effectively, exhibiting long-term durability unmatched by other energy sectors.
Amid this volatility, the seven oil stocks discussed in the article have effectively distinguished themselves. They have consistently provided dividends to shareholders, and their substantial scale equips them to handle the inherent fluctuations of crude oil prices. These are the oil stocks you may want to consider when investing in oil stocks for solid returns.
Chevron (CVX)
Chevron (NYSE:CVX) stands out in its niche with its remarkable ability to generate robust cash flow, reinforcing its position as a promising investment for sustained capital appreciation. More importantly, Chevron’s healthy free cash flow base of over $30 billion has enabled a steadily growing dividend payout and a significant buyback of its own stock. As of April 1, the company has supercharged this commitment by instituting a new $75 billion buyback program.
Moreover, the financial prudence exhibited in recent years, chiefly through reducing long-term debt and enhancing cash and cash equivalents, further bolsters Chevron’s dividend strength. Sitting comfortably with a $7.4 billion net debt position and a considerable $15.8 billion cash reserve as of March 2023, Chevron can continue to meet its near-term financial obligations effectively. Chevron’s unshakeable cash flow generation and agility in navigating near-term turbulence make it a compelling choice.
Exxon Mobil (XOM)
Exxon Mobil (NYSE:XOM) is a leading oil behemoth that’s that continues to turn heads with its financial robustness. Its mighty free cash flows of over $45 billion testify to this notion. Consequently, it’s been one of the best income investments, with increasing dividends over the past couple of decades.
In a recent development, the company has expanded and extended its share repurchase program. Between 2022 and 2024, Exxon plans to buy back shares worth up to $50 billion. This strategy will significantly trim down its outstanding share count, leading to an appreciable surge in dividends per share.
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Furthermore, its recent acquisition of lithium player Tetra Tech positions it for long-term gains in the green energy space. Additionally, its collaboration with Tetra enables Exxon to leverage its core competency in drilling and offers a valuable entry point into the evolving lithium space in the United States.
BP (BP)
BP (NYSE:BP), a titan in the European energy sphere, has taken a hammering of late at the stock market. However, it’s imperative to view this within a broader context, with the firm reporting a commendable $5 billion profit in the year’s first quarter due to successful oil and gas trading endeavors.
Despite this strong financial performance, BP’s current market valuation is divorced from its fundamentals. Hovering around $35 per share, BP offers a compelling opportunity for investors, especially considering its enticing dividend yield of 4.6%. It makes the stock appealing, presenting the potential for capital appreciation and income generation. BP’s profitability and yield may present an attractive opportunity for discerning investors seeking a bargain in the energy sphere.
Vista Energy (VIST)
Vista Energy (NYSE:VIST) is Argentina’s third-largest oil producer occupying a commanding position in the country’s vibrant energy sector. The firm’s stellar cash generation and execution capabilities solidify its position as a leading player in the Argentine energy scene. Its levered free cash flow margin is at a whopping 8.3%, over 430% higher than its 5-year average.
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Unveiling impressive first-quarter results recently, the company announced a significant 46% leap in revenue to $303 million compared to the same period last year. Further buoying its robust financial performance, the adjusted net income rose by 84% to $72 million. The Argentine government’s pro-oil policies, with Vista’s massive exposure to the Vaca Muerta shale and the rise in international oil prices, create a promising outlook for this energy powerhouse.
Occidental Petroleum (OXY)
Oil and gas player Occidental Petroleum (NYSE:OXY) has an ace in the hole, with its largest shareholder being Berkshire Hathaway. Iconic investment firm led by the Oracle of Omaha Warren Buffet continues to expand its stake in the company, an association that can be traced back to 2019. A recent enlargement of Berkshire’s position recently has triggered conjecture about a possible takeover.
However, it’s worth noting that beyond the intrigue of possible ownership shifts, OXY has been demonstrating robust growth avenues in its own right. Additionally, its business has been remarkably profitable, delivering double-digit gains across key metrics over the past several years. Moreover, its diversification efforts have also borne fruit, with a shining example for the company being OxyChem, OXY’s chemicals division. In 2022, OxyChem celebrated a triumphant year, registering a record EBIT of $2.5 billion. This level of performance underscores the inherent strength of OXY’s diverse operations and its potential for continued growth.
Calumet Specialty Products Partners (CLMT)
Calumet Specialty Products Partners (NASDAQ:CLMT) is a prolific name headquartered in Indianapolis, boasting an expansive product portfolio. Their repertoire encompasses base oils, specialty oils, esters, fuels, and other lubricants under the renowned Bel-Ray and Royal Purple brands.
Furthermore, the company undertook a $90 million expansion of its oil refinery in Great Falls, Montana. This strategic move places Calumet on the track to become the biggest producer of sustainable aviation fuel (SAF) in the U.S. This achievement should strengthen its foothold in the renewable diesel market.
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Moreover, Calumet has a strategic financial roadmap in place, planning to invest $800 million over the next two years for capital enhancement and debt reduction. The company foresees potential expansion to bolster its SAF production, aiming to push its EBITDA to an impressive $1.1 billion per year. This financial outlook underscores Calumet’s commitment to sustained growth and strategic investment.
Mesa Royalty Trust (MTR)
Breaking away from the traditional investment mold, Mesa Royalty Trust (NYSE:MTR) offers a unique proposition. As a royalty trust, it provides investors plenty of opportunities to reap profits from the income generated by particular assets such as coal mines, oil wells, or gas deposits. Investor returns are directly tied to the revenue derived from these assets.
Operating oil and gas properties across Kansas, New Mexico, and Colorado, Mesa Royalty draws the lion’s share of its profits from New Mexico holdings. The trust’s distinct tax structure enables it to offer an attractively high dividend yield, currently at a remarkable 7.1%. Compared to conventional stocks, this yield is decidedly substantial, further establishing Mesa Royalty Trust as a top player exploring different avenues in the energy sector.
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On the date of publication, Muslim 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
