In this article, we discuss the 10 best crude oil stocks to buy today. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Crude Oil Stocks To Buy Today.
After experiencing the pandemic-led slump in early 2020, the energy sector has had one of its best years in 2021. The energy sector, particularly oil and gas, outperformed in the past year and was named the best-performing sector in 2021, with a total return of 53.3% as of early January.
The price of crude oil has risen dramatically since Russia’s invasion of Ukraine, causing market disruption. In response to Russia’s invasion of Ukraine, President Joe Biden announced a ban on Russian fossil imports, including oil, on March 8. Following this, the US crude oil index WTI jumped as much as 7% to trade above $128 per barrel, while Brent crude oil, the international benchmark, jumped 7.7% to $132.75 before trading off the highs.
In January, market analysts predicted that crude oil would hit $100 per barrel in the last two quarters of 2022 before the conflict between Russia and Ukraine erupted. Now, JPMorgan strategists believe that oil prices may increase to $185 per barrel, while Bank of America believes that if most of Russia’s oil exports are cut off, prices might hit $200 per barrel.
As of March 10, Energy Select Sector SPDR Fund (XLE) is up 45.07% year to date. Among the crude oil stocks that are currently outperforming in the market are Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL).
Our Methodology
We analyzed the crude oil stocks that recently received positive analyst ratings, have strong financial statements and business growth potential. Using Insider Monkey data, we ranked these crude oil stocks based on the number of hedge funds that held positions in them at the end of the fourth quarter of 2021.
Photo by David Thielen on Unsplash
Best Crude Oil Stocks To Buy Today
10. Matador Resources Company (NYSE:MTDR)
Number of Hedge Fund Holders: 26
Matador Resources Company (NYSE:MTDR) is an independent energy company that explores crude oil and natural gas assets. The Texas-based oil and gas company has operations in the Delaware Basin, Eagle Ford shale, and Haynesville shale. Matador Resources Company (NYSE:MTDR) reported total oil and gas production of 31.5 million barrels of oil equivalent in 2021.
Matador Resources Company (NYSE:MTDR) reported a fourth-quarter net income of $214.8 million, or $1.80 earnings per share, a 6.6% increase from Q3 2021. In October, the company increased its quarterly dividend by 100% to $0.025 per share. Currently, Matador Resources Company (NYSE:MTDR) pays its shareholders an annual dividend of $0.20 per share.
Analysts and hedge funds are bullish about the Texas-based oil company. MKM Partners analyst John Gerdes raised Matador Resources Company’s (NYSE:MTDR) price target to $56 from $50 in February. Gerdes kept his Buy recommendation on the oil stock. On the other hand, Millennium Management, a New York-based investment management firm, increased its interest in Matador Resources Company (NYSE:MTDR) by 26% in the fourth quarter, bringing its total holdings to 1.74 million shares worth $64.5 million.
9. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 41
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL), Marathon Petroleum Corporation (NYSE:MPC), is one of the crude oil companies to look into for income investors as it has a generous shareholder reward program. The Ohio-based oil firm now provides a $2.32 per share yearly dividend, yielding 3.04%. The five-year annualized dividend growth rate for Marathon Petroleum Corporation (NYSE:MPC) is 11.27%.
Marathon Petroleum Corporation (NYSE:MPC) also returned $3 billion to shareholders in the fourth quarter through share repurchases and completed more than half of the $10 billion repurchase program at the end of January 2022. Marathon Petroleum Corporation (NYSE:MPC) announced an additional $5 billion share repurchase authorization in early February.
Marathon Petroleum Corporation (NYSE:MPC) is a market analyst and hedge fund favorite because the company is currently expanding its renewable energy operations through an affordable energy transition plan. Cowen analyst Jason Gabelman increased his price target for Marathon Petroleum Corporation (NYSE:MPC) to $90 from $83 on February 3, while keeping an Outperform rating on the shares. As of the end of December 2021, Elliott Management is the biggest shareholder of the Ohio-based crude oil refiner, owning 10.5 million shares worth $676 million.
Here is what Clark Street Value has to say about Marathon Petroleum Corporation in its Q4 2021 investor letter:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum (MPC) as a proxy for Par Pacific (PARR) since long-dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
8. Shell plc (NYSE:SHEL)
Number of Hedge Fund Holders: 41
Shares of European oil giant Shell plc (NYSE:SHEL) jumped 3.10% at the end of the first week of March. As a result of the ongoing invasion of Russia in Ukraine, the London-based energy firm recently announced its complete withdrawal from Russian oil partners, as well as a suspension on future Russian oil purchases. Shell plc (NYSE:SHEL) is also closing its service stations, aviation fuels, and lubricants operations in Russia.
Shell plc (NYSE:SHEL) reported adjusted earnings of $6.4 billion in the fourth quarter of 2021. As profits soared in the quarter due to higher contributions from higher LNG trading and an increase in commodity prices, the London-based oil and gas company boosted its quarterly dividend by approximately 4%. Shell plc’s (NYSE:SHEL) stockholders will receive a $0.25 per share dividend beginning in Q1 2022. Furthermore, the corporation disclosed an $8.5 billion share repurchase program for the first half of 2022.
On February 4, Cowen analyst Jason Gabelman maintained an Outperform rating on Shell plc (NYSE:SHEL) and increased his price target for the crude oil stock to $58 from $53. Gabelman anticipates the company’s improvement to its cash return framework, which could also occur with the company’s Q2 earnings. During the fourth quarter of 2021, 41 hedge funds held stakes in Shell plc (NYSE:SHEL), up from 33 in Q3 2021.
Here is what Goehring & Rozencwajg Associates has to say about Shell plc (NYSE:SHEL) in its Q3 2021 investor letter:
“Royal Dutch Shell’s ESG challenges continue unabated. A Dutch court ruled in May that Royal Dutch Shell must cut its CO2 output by 45% by 2030 to align their policies with the Paris Climate Accord. In a statement issued after the verdict, a Shell spokesperson acknowledged that “urgent action is needed on climate change and the company is accelerating efforts to reduce emissions.” If the pressure from the Dutch court system was not enough, an activist shareholder has proposed breaking the company apart to address ESG concerns. On October 27th, Third Point Management announced the following.
“If Shell pursues this type of strategy it would probably lead to an acceleration of carbon dioxide reduction. […] Breaking Shell into two operating units would create a standalone legacy energy business (upstream, refining, and chemicals) that could slow capex beyond what is has already promised, sell assets, and prioritize return of cash to shareholder which can be reallocated into low-carbon areas of the market.”
Shell has already cut spending dramatically over the last decade. After having peaked at $39 bn in 2013, upstream capital spending fell to only $17 bn in 2020 – a drop of nearly 60%. Spending has barely recovered in the three quarters of 2021. A lack of spending has already impacted production. Proforma for the 2016 acquisition of BG Group, Shell’s total production has fallen 13% since capital spending peaked in 2013. These trends are accelerating: Shell’s production over the first nine months of 2021 have fallen 7% compared with the same period last year.
If Royal Dutch Shell’s upstream capital spending remains at today’s depressed levels, we estimate the company will only be able to replace 30% of production with new reserves and that production will fall 40% over the next nine years. If spending is further curtailed (as is being proposed), Shell’s oil and natural gas production would collapse – something that may have already started.”
7. Phillips 66 (NYSE:PSX)
Number of Hedge Fund Holders: 41
Phillips 66 (NYSE:PSX) is a crude oil and petroleum product midstream company. The Texas-based energy company also engages in refining, chemicals, and oil marketing. Phillips 66 (NYSE:PSX) sells refined petroleum products and renewable fuels through 7,110 branded outlets in the United States and 1,700 branded outlets worldwide.
Phillips 66 (NYSE:PSX) generated $1.8 billion in operating cash flow in the fourth quarter of 2021, with the company returning $403 million in dividends to stockholders. In addition, the company increased its quarterly dividend by 2.2% to $0.92 in October. As of March 8, shares of Phillips 66 (NYSE:PSX) increased 26% in value in the past six months.
As of the end of the December quarter, 41 hedge funds had positions in Phillips 66 (NYSE:PSX), up from 34 in the previous quarter. Phillips 66’s largest stakeholder, New York-based investment management firm Millennium Management, boosted its stake in the crude oil retailer by 145% in the fourth quarter of 2021, bringing its total holdings to 3.15 million shares.
6. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 43
Pioneer Natural Resources Company (NYSE:PXD), along with Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and Shell plc (NYSE:SHEL), is one of the crude oil companies profiting from the ongoing oil price recovery. The Texas-based independent oil and gas exploration and production firm generated $1.1 billion in the fourth quarter and $3.2 billion in full-year 2021 free cash flow. As a result of this, Pioneer Natural Resources Company (NYSE:PXD) was able to return $1.9 billion to shareholders in dividends and share repurchases.
The Texas-based oil firm provides a unique payout structure to its stockholders, which draws more investors. Pioneer Natural Resources Company (NYSE:PXD) issued a quarterly base-plus-variable dividend of $3.78 per share in February, giving the stock an annualized total base-plus-variable dividend yield of almost 7%.
On February 23, Piper Sandler’s Mark Lear raised his price target on Pioneer Natural Resources Company (NYSE:PXD) from $256 to $274. Pioneer is “passing the initial test on promised capital discipline” through price cycles, according to Lear. In comparison, at the end of December 2021, 43 hedge funds tracked by Insider Monkey held stakes in the independent oil and gas company, compared to 48 in Q3 2021.
Here is what ClearBridge Investments has to say about Pioneer Natural Resources Company (NYSE:PXD) in its Q3 2021 investor letter:
“Over the last year, we have also added a position in Pioneer Natural Resources Company (NYSE:PXD), a best-in-class producer in the Permian Basin. We added Pioneer as we anticipated rising commodity prices and sought more direct leverage to that trend. Our overweight to energy has benefited our performance this year, in particular through the first half of the year, and we believe the sector, still less than 3% of the S&P 500, remains underinvested and attractive going forward.”
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Disclosure. None. 10 Best Crude Oil Stocks To Buy Today is originally published on Insider Monkey.
