This year, oil prices have fluctuated, and sometimes dramatically. The main benchmark for U.S. oil prices, WTI (West Texas Intermediate) crude, began the year at about $75 per barrel before surging to over $120 per barrel in the wake of Russia’s invasion of Ukraine. Since then, the price of crude has decreased due to worries that a possible recession would reduce demand. However, following news that OPEC+ will reduce its output by 2 million barrels per day, crude oil has risen to about $90 per barrel after hitting a bottom in the mid-$70s in late September.
OPEC+’s decision could create a floor under oil prices or even drive them higher. Because of this, and based on the revenue stream they can potentially generate at $90 a barrel, several oil stocks appear to be drastically undervalued right now, freeing up space for substantial future returns on one’s investment. I’ve recommended oil stocks before, but with timing being such a vital factor in the marketplace, I am revisiting familiar territory strictly for the sake of intelligent investing.
I picked these three oil stocks accounting for resilience, growth potential, consistent dividends, and overall success. The experts agree that these would make for thoughtful portfolio picks:
Devon Energy Corp (DVN)
Devon Energy Corporation (DVN) is an independent energy company that explores, develops, and produces oil, natural gas, and NGLs (natural gas liquids) in the United States. DVN has an estimated total of 5,134 gross wells. DVN is involved in the operation of a handful of oil reserves: Heavy Oil, Delaware Basin, Eagle Ford, STACK, Barnett Shale, and Rockies Oil. DVN was established in 1971 and is based in Oklahoma City, Oklahoma.
DVN has an impressive track record, to say the least. It has the distinction of surpassing analysts’ quarterly earnings projections for four consecutive quarters. Most recently, DVN beat Q2 EPS and revenue forecasts by 9.12% and 18.36%, respectively; In Q1, EPS by 6.98% and revenue by 6%. DVN’s year-over-year growth is strong: Revenue +78.91%, Net Income +654.69%, EPS +671.05%, and Net Profit Margin +321.56%. With a $46.7 billion market cap, DVN trades at less than 7.7 times its free cash flow. That makes DVN wildly undervalued compared to the major indices. DVN has a dividend yield of 6.45%, with a quarterly payout of $1.16 per share. From analysts that provide annual price estimates, DVN has a median price target of 80.00, with a high of 115.00 and a low of 57.00. This shows a 10.71% increase from its last price, and DVN has a buy rating that feels hard-earned.
Diamondback Energy Inc (FANG)
Diamondback Energy, Inc (FANG) is a privately held oil and gas firm specializing in the acquisition, development, exploration, and exploitation of unconventional onshore oil and gas deposits. FANG operates through both upstream and midstream services. The Permian Basin activities in West Texas focus on FANG‘s upstream business division. FANG is also active in the Midland and Delaware Basin reserves. FANG was established in December 2007 and is based in Midland, Texas.
FANG is considered one of the most undervalued stocks on the market, and you would never know it otherwise because of its fantastic track record. Earnings-wise, it shares DVN’s distinction of easily besting Wall Street’s projections on both lines for a big chunk of consecutive quarters. Q2 of this year had FANG beating EPS and revenue forecasts by 5.99% and 13.46%, respectively. Q1 showed FANG surpassing EPS forecasts by 11.33% and revenue by 24.45%. At $90 per barrel, FANG expects to generate $4.3 billion in free cash flow. FANG‘s market cap is $24.1 billion, trading at 5.6 times its free cash flow, or an 18% free cash flow yield. FANG has a dividend yield of 2.11%, with a quarterly shareholder payout of 75 cents per share. The analysts who offer 12-month consensus price estimates give FANG a median price target of 170.00, with a high of 230.00 and a low of 143.00. This shows a 19.44% increase from its last price, and the analyst consensus is strong on FANG’s buy rating.
ConocoPhillips (COP)
ConocoPhillips (COP) is a multinational corporation that discovers, produces, transports, and sells natural gas, crude oil, liquefied natural gas (LNG), and natural gas liquids (NGLs). COP’s primary operations are in traditional oil reservoirs, heavy oil, shale gas, and oil sands. COP’s portfolio comprises unique industry plays, with assets in North America, Asia, Australia, and Europe, including multiple natural gas operations and an inventory of conventional and unconventional exploration opportunities. COP was established in 1917 and is based in Houston, Texas.
COP is similar to its peers on this list regarding a nearly flawless earnings record and considerable growth (year-over-year) figures. EPS estimates have been consistently exceeded, but revenue forecasts haven’t stood a chance. In Q1 and Q2 of this year, COP broke revenue projections by 11.75% and 7.79%, respectively. COP boasts $19.8 billion in sales for the current quarter, with an EPS of $3.82 per share. Year-over-year: Revenue +123.67%; Net Income +148.05; EPS +155.58%. COP has a dividend yield of 3.77%, with a quarterly shareholder payout of $1.11 per share. The analysts who provide yearly stock price estimates have weighed in, giving COP a consensus price target of 126.50, with a high estimate of 153.00 and a low of 87.00. This represents a 7.39% increase from current pricing, and COP has a nearly uncontested buy rating that investors simply cannot ignore, given the state of the market.
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