3 Oil Stocks to Watch as OPEC+ Features Biggest Production Cut Since 2020
Oil inventories rose Wednesday morning after OPEC and its allies announced plans cut production by 2 million bpd, which is actually the biggest cut since the pandemic hit in late 2019. OPEC+ began increasing production quotas in June 2021, gradually increasing supply by an additional 400,000 bpd to global markets each month as demand for crude begins to recover. OPEC+ cut production by 100,000 barrels per day in September; however, it has never implemented such a significant production cut in such a tight market, with demand remaining resilient and inventories at historically low levels. Indeed, Goldman Sachs says such a dramatic reduction is expected to push oil prices down triple digits over the next three months.
Here are three energy stocks to keep on your radar.
1. Devon Energy Corporation
Market cap: $39.4 billion
Cumulative returns since the beginning of the year: 48.3%
Earlier this year, BofA analyst Doug Leggate advised investors to focus on oil companies that could increase their free cash flow through consolidations or other cost-cutting measures. , naming Devon Energy (NYSE: DVN), Pioneer of natural resources (NYSE:PXD), and EOG Resources (NYSE: EOG).
Devon is a perfect match for this playbook.
DVN stock was one of the best performing energy stocks thanks to strong earnings and continued cost discipline, including a variable dividend structure.
Following the merger with WPX Energy last year, the company announced fixed and variable dividends, which pleased Wall Street. In the second quarter, Devon paid up to 50% of available cash as a variable dividend, bringing the total dividend to $1.55 per share. The stable share has been indifferent, currently shedding just over 1%. But if the latest convertible payout is a sign of the future, shareholders could receive more than 10% in total.
Some Wall Street analysts had previously pointed to the potential for DVN to post a dividend yield of up to 8% by the end of the year. Devon has already surpassed this figure and now boasts a juicy forecast dividend yield estimated at 9.7%.
- western oil
Market cap: $64.1 billion
Cumulative returns since the beginning of the year: 106.3%
Based in Houston Western Oil Company (NYSE: OXY) together with its subsidiaries, engages in the acquisition, exploration and development of oil and gas properties in the United States, the Middle East, Africa and Latin America. The company also has a strong petrochemical segment.
Back in May, Ecopetrol (NYSE: EC) announced an agreement to develop four blocks in deep water offshore Colombia with Occidental Petroleum. Ecopetrol has revealed that it will take a 40% stake in the blocks while Occidental subsidiary Anadarko Colombia will hold a 60% stake and serve as operator. Related: EU ambassadors agree Russian oil price cap
But what investors are most excited about is Warren Buffet’s big bet on it. Earlier this month, Buffett added an additional 5.99 million shares of OXY to his portfolio, and there appears to be no stopping his buying spree. Since July alone, Buffet has added more than 20 million new stocks to his portfolio.
Should you buy just because Buffet is all over this one? Well, maybe. OXY’s second-quarter earnings beat estimates with record earnings, gaining $3.16 per share, a stunning 888% year-over-year increase. The company also reported a more than 80% increase in revenue, with sales up 56% in the first quarter.
When OXY releases its third quarter results in November, anyone deeply involved in the oil field will be watching closely. Of course, much of the second-quarter gains are due to high oil prices, but Wall Street is already targeting estimates of an additional $2.68 in earnings per share, adding a gain of more than 200% to the gain of 888% of the second trimester.
- Marathon Oil Corp.
Market cap: $15.3 billion
Cumulative returns since the beginning of the year: 48.0%
giant oil refiner Marathon oil (NYSE: MRO) operates as an independent exploration and production company in the United States and internationally. The Company is engaged in the exploration, production and marketing of crude oil and condensates, natural gas liquids and natural gas; and the production and marketing of products made from natural gas, such as liquefied natural gas and methanol. It also owns and operates 32 central gathering and processing facilities; and the Sugarloaf Gathering System, a 42-mile gas pipeline through Karnes and Atascosa counties. The company was formerly known as USX Corporation and changed its name to Marathon Oil Corporation in December 2001. Marathon Oil Corporation was founded in 1887 and is headquartered in Houston, Texas.
Marathon oil job Second-quarter non-GAAP EPS of $1.32, beating Wall Street consensus by $0.04 while revenue of $2.3B (+101.8% YoY) beat $190M . For the full year 2022, the company raised its equity revenue forecast to a new range of $520 million to $560 million.
What you need to understand about Marathon is that it only works upstream, so betting on Marathon is much more of a bet on oil prices. The doubling of its revenue year-on-year in the second quarter is roughly the direct result of soaring oil prices. So adding Marathon to your portfolio means betting on crude oil prices in an incredibly volatile market.
By Alex Kimani for Oilprice.com
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