In an interview on October 3 with CNBC, Andy Critchlow, who serves as the head of news for the EMEA region at S&P Global Commodity Insights, discussed the current state of the oil market and the potential implications of various geopolitical events on oil prices.
Critchlow noted that the oil market is facing “dangerous times” due to a high level of geopolitical risk and that it’s hard for anyone in that market to gauge the direction of the market. However, he pointed out that this geopolitical uncertainty has not yet been reflected in the price of oil, despite events between Israel and Iran and numerous attacks on oil shipping in the Strait of Hormuz over the past two years. The price of oil has not surged significantly and there is no geopolitical risk premium as oil still is currently trading at less than $75 per barrel.
Critchlow also discussed the potential impact of a disruption to Iranian oil supplies, which account for around 4% of global supply. He noted that any attack on Iranian oil facilities or refineries could have a significant knock-on effect in the region. However, Critchlow noted that the market is looking ahead to next year and the potential for an excessive supply, there is already an idled supply of 5.6 million barrels per day on the sidelines.
According to Critchlow, the oil market is also challenged by supply and demand imbalances and the potential for a price war between OPEC+ members is a real concern. Critchlow commented on recent comments from the Saudi Energy Minister on October 2, who warned of the potential for $50 oil if OPEC+ members don’t stick to agreed-upon production limits. Critchlow interpreted this as a veiled threat, suggesting that Saudi Arabia may be prepared to start a price war if other members of the OPEC+ alliance do not comply with production cuts.
According to Critchlow, Russian crude was displaced from its traditional European markets and flowed into China and India, which are some of the biggest drivers for the oil market. These were the markets that Saudi Arabia effectively owned with its major Gulf partners in OPEC and that is why Saudi’s market has been squeezed in its core markets by Russia.
While the current price of oil remains relatively stable, the underlying risks and challenges suggest that a significant shift in the market could be on the horizon. With that in context let’s take a look at the 10 best energy stocks to buy according to hedge funds.
An aerial view of an energy refinery, with massive tanks and piping defining the landscape.
Our Methodology
To compile our list of the 10 best energy stocks to buy according to hedge funds, we used the Finviz and Yahoo stock screeners to find the largest energy companies. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Energy Stocks To Buy According to Hedge Funds
10. Shell plc (NYSE:SHEL)
Number of Hedge Fund Investors: 49
Shell plc (NYSE:SHEL) is one of the world’s largest oil and gas companies, with a global presence in both upstream and downstream operations. The company is involved in oil exploration, production, refining, and the sale of oil products, chemicals, and renewable energy. The company is involved in every aspect oil and gas business and is transitioning towards cleaner energy sources.
On October 23, Shell Energy North America (SENA), a subsidiary of Shell plc (NYSE:SHEL) announced that it has signed an agreement to acquire a 100% equity stake in RISEC Holdings, LLC, which owns a 609-megawatt (MW) two-unit combined-cycle gas turbine power plant in Rhode Island, USA. This acquisition will secure long-term supply and capacity offtake for Shell in the deregulated Independent System Operator New England (ISO New England) power market, where SENA has held a contract with RISEC under an energy conversion agreement for 100% of the plant’s energy offtake since 2019.
The acquisition is expected to provide Shell plc (NYSE:SHEL) with valuable trading opportunities, guaranteeing SENA’s position in the market and capitalizing on the plant’s value within its existing trading portfolio. The RISEC combined-cycle gas turbine power plant supplies power to the ISO New England power market, where demand is expected to increase in coming decades due to growing decarbonization efforts in sectors such as home heating and transportation. The plant has a maximum capacity of 609 MW and an average operating capacity of 594 MW and has been in operation since its completion in 2002. The acquisition is subject to regulatory approvals and is expected to close in Q1 2025. It will be absorbed within Shell plc’s (NYSE:SHEL) cash capital expenditure guidance, which remains unchanged.
9. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Investors: 50
Marathon Petroleum (NYSE:MPC) is one of the largest petroleum refining and marketing companies in the United States, providing transportation fuels, lubricants, and petrochemicals. The company operates an extensive network of refineries and pipelines and has a significant presence in midstream logistics.
Marathon Petroleum (NYSE:MPC) holds a 64% stake in MPLX (NYSE:MPLX), providing a strong foundation for its business. In Q2, Marathon Petroleum (NYSE:MPC) received a quarterly distribution of $550 million from MPLX.
Marathon Petroleum’s (NYSE:MPC) cash flow has been strong, with $2.7 billion in cash flow from operations (CFFO) and modest capital expenditures, resulting in free cash flow (FCF) of $2.2 billion. For Q3, Marathon Petroleum (NYSE:MPC) forecasts a 90% utilization rate with operating costs projected at $5.35 per barrel, the company’s distribution costs amount to $6.5 per barrel, and the strong spreads are expected to support continued returns.
8. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Investors: 52
Devon Energy Corporation (NYSE:DVN) is an independent oil and natural gas exploration and production company headquartered in the United States. The company primarily operates in North America and focuses on high-quality oil and gas resources.
On September 27, Devon Energy Corporation (NYSE:DVN) finalized the acquisition of Grayson Mill for $5 billion. This strategic move in the Williston Basin will add 307,000 net acres to the company’s portfolio and is expected to contribute 100,000 barrels of oil equivalent per day (BOE/D) to its production in FY 2025. The deal is anticipated to be accretive to earnings and is scheduled to close by the end of the third quarter. Commenting on the event Rick Muncrief, President and CEO of Devon Energy Corporation (NYSE:DVN) said:
“We are excited to announce the completion of our acquisition of Grayson Mill Energy. This strategic transaction is an excellent fit for Devon, enabling us to efficiently expand our operating scale and production,”
In Q2, Devon Energy Corporation reported revenues of $3.9 billion, an 8.9% increase from the previous quarter, with a net income of $844 million and earnings per share (EPS) of $1.41. The company has also raised its stock buyback authorization to $5 billion, an increase of 67%, enhancing its appeal as a capital return investment.
7. Cameco Corporation (NYSE:CCJ)
Number of Hedge Fund Investors: 60
Cameco Corporation (NYSE:CCJ) is a leader in uranium production, boasting a significant presence in Canada’s Athabasca Basin through its Cigar Lake and McArthur River mines. The company operates under an integrated business model that includes uranium refining, conversion, and fuel manufacturing. Cameco Corporation (NYSE:CCJ) has established itself as a major player in the nuclear fuel cycle. Additionally, the company is actively involved in the development of small modular reactors (SMRs).
Cameco Corporation (NYSE:CCJ) holds a 40% stake in the Inkai deposit in Kazakhstan, the largest uranium deposit in the world, which serves as a substantial source of uranium production. The nuclear industry is experiencing growth driven by increasing global demand for clean and reliable energy, and Cameco Corporation (NYSE:CCJ) is well-positioned to take advantage of this trend. With its diversified operations, strategic partnerships, and expertise in the nuclear fuel cycle, the company is an attractive player in the market. Government policies aimed at reducing carbon emissions and addressing rising electricity needs are expected to drive up uranium prices, benefiting Cameco Corporation (NYSE:CCJ) due to its significant uranium reserves and production capacity.
Cameco Corporation (NYSE:CCJ) anticipates delivering between 32 and 34 million pounds of uranium in 2024, which represents a 1.5% increase compared to the previous year. The company’s extensive expertise in uranium mining and conversion places it in a strong position to take advantage of the increasing demand for nuclear energy. Aristotle Capital Management highlighted Cameco (NYSE:CCJ) in its Q2 investor letter:
“Cameco Corporation (NYSE:CCJ), one of the world’s largest publicly traded uranium producers, was the top contributor during the period. Support from governments and policymakers for nuclear energy has continued to increase in 2024 as countries realize it can play a crucial role in both promoting energy security and lowering dependence on fossil fuels to meet environmental goals. With higher demand for uranium across the world, Cameco’s production was up more than 25% year-over-year, and its long-term supply contracts have increased (annual commitments now standing at 28 million pounds per year through 2028). We view these fundamental improvements as further proof Cameco is making progress on our catalyst of increasing its uranium volume sold at higher prices, all while lowering production costs through scale and its access to some of the highest-grade ore on the planet. In addition, we believe the company’s continued integration of Westinghouse Electric Company’s market-leading downstream capabilities will allow it to offer a highly competitive nuclear fuel solution. In our opinion, this puts Cameco on track to enjoy higher levels of FREE cash flow and the ability to de-risk its balance sheet as it meets global energy needs.”
6. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Investors: 62
Occidental Petroleum Corporation (NYSE:OXY) is a U.S.-based oil and gas exploration company with operations in the U.S., the Middle East, and Latin America. The company is well-regarded for its strong presence in shale oil production, particularly in the Permian Basin located in the southwestern United States, the DJ basins, and the offshore Gulf of Mexico.
Occidental Petroleum Corporation (NYSE:OXY) is one of the biggest producers of oil in the Permian Basin, where it owns roughly 2.8 million net acres of land. On August 1, Occidental Petroleum (NYSE:OXY) announced the completion of its acquisition of CrownRock for approximately $12 billion. This acquisition was primarily motivated by CrownRock’s assets in the Midland Basin, which complement Occidental Petroleum’s (NYSE:OXY) focus in the Permian Basin. The acquisition resulted in a 33% increase in Occidental Petroleum Corporation’s (NYSE:OXY) inventory of breakeven locations for prices below $40 per barrel. The outlook for production growth at Occidental Petroleum (NYSE:OXY) appears favorable.
Occidental Petroleum (NYSE:OXY) is also focusing on its debt reduction and divestiture goals. As of Q3, the company achieved a $3 billion reduction in principal debt. A recent public offering of a portion of Occidental Petroleum’s (NYSE:OXY) common units in Western Midstream Partners, raised $700 million, bringing the company’s total divestments for 2024 to approximately $1.7 billion in closed or announced deals.
5. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Investors: 64
Chevron Corporation (NYSE:CVX) is a prominent vertically integrated company operating globally in the oil and gas exploration, production, and refining sectors. Beyond its traditional operations, Chevron Corporation (NYSE:CVX) is also making investments in green energy technologies and services, including wind, solar, and biofuels.
Chevron Corporation (NYSE:CVX) aims to target 1 million barrels of oil per day in the Permian Basin. On October 14, the company announced to increase in its oil and gas production in the Permian Basin, a region renowned for its oil and gas reserves. The company has targeted production of 1 million boe/d by 2025 in the New Mexico end of the Permian.
Chevron Corporation’s (NYSE:CVX) New Mexico asset manager, Duncan Healey, highlighted the area’s high-quality and untapped reserves as key factors for this expansion. According to Healey, Chevron Corporation (NYSE:CVX) expects better production than from other areas of the Permian and can extract oil and gas easily. The company is also adopting cleaner technology such as using electrical compressors instead of natural gas fuelled to reduce the carbon intensity of its operations.
Chevron Corporation (NYSE:CVX) has also begun oil and natural gas production from the Anchor project in the deepwater U.S. Gulf of Mexico by using high-pressure technology that can operate safely at up to 20,000 psi, with reservoir depths reaching 34,000 feet below sea level. The Anchor semi-submersible floating production unit (FPU) has a design capacity of 75,000 gross barrels of oil per day and 28 million gross cubic feet of natural gas per day. The development consists of seven subsea wells tied into the Anchor FPU, located in the Green Canyon area, approximately 140 miles off the coast of Louisiana, in water depths of approximately 5,000 feet. Total potentially recoverable resources from the Anchor field are estimated to be up to 440 million barrels of oil equivalent.
4. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Investors: 65
Cheniere Energy, Inc. (NYSE:LNG) is the largest exporter of liquefied natural gas (LNG) in the US. The company’s Sabine Pass and Corpus Christi facilities are key export terminals that play an essential role in addressing the increasing demand for cleaner energy sources worldwide.
Cheniere Energy, Inc. (NYSE:LNG) is set to experience significant growth, fueled by the rising demand for gas and LNG as a transitional fuel in the global energy landscape. According to McKinsey, global demand for natural gas is expected to grow between 10% and 15%. A report by the Gas Exporting Countries Forum (GECF) further projects that liquefied natural gas (LNG) trade is expected to surpass long-distance pipeline trade by 2026 and to more than double by 2050, reaching 805 million tonnes, or 64% of traded gas.
Cheniere Energy, Inc. (NYSE:LNG) is strategically positioned to capitalize on this growth, the company owns two of the three largest LNG terminals in the United States, Sabine Pass, and Corpus Christi, which provides a notable competitive advantage. Cheniere Energy, Inc. (NYSE:LNG) is also committed to reducing its debt and investing in expanding production capacity. The company plans to repurchase its shares and authorize an additional $4 billion through 2027.
3. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Investors: 67
Schlumberger Limited (NYSE:SLB) is a prominent oilfield services company that provides solutions for the exploration and development of oil and gas resources in more than 85 countries.
In Q3, Schlumberger Limited’s (NYSE:SLB) revenue increased 10% year over year to $9.16 billion. Despite the flat revenue compared to the previous quarter, the company achieved a notable increase in its adjusted EBITDA margin, which expanded by 55 basis points to 25.6%. Additionally, the company generated a significant $1.81 billion in free cash flow during the quarter, while earnings per share (EPS) reached $0.89, excluding charges and credits.
The company’s digital and integration segment delivered a strong performance, with revenue increasing by 4% sequentially to $1.1 billion. The segment’s margins also expanded by 456 basis points to 35.5%, demonstrating the company’s growing expertise in digital solutions. Meanwhile, the production systems segment saw a 3% sequential increase in revenue to $3.1 billion, with margins expanding by 110 basis points to 16.7%.
In terms of cash flow, Schlumberger Limited (NYSE:SLB) reported $2.4 billion in cash flow from operations, while capital investments totaled $644 million during the quarter. The company also returned a significant amount of capital to shareholders, repurchasing 11.3 million shares for $501 million. Furthermore, Schlumberger Limited (NYSE:SLB) announced several new digital products and partnerships, including collaborations with NVIDIA and Amazon Web Services.
On October 10, Schlumberger Limited (NYSE:SLB), Amazon Web Services (AWS), and Shell Global Solutions Nederland announced a multi-year collaboration agreement to deliver digital end-to-end workflows for Shell using Schlumberger Limited’s (NYSE:SLB) subsurface solutions on AWS cloud infrastructure. The partnership aims to provide high-performance and cost-efficient subsurface digital solutions, which will be used by Shell and made available to the industry.
The collaboration will utilize a data platform to enhance the user experience, increase efficiency and collaboration, and produce better insights for Shell and the energy industry. This agreement builds on the existing strategic collaboration between Schlumberger Limited (NYSE:SLB) and AWS, accelerating the availability of Schlumberger Limited’s (NYSE:SLB) industry-leading software, including Petrel subsurface solutions and Techlog wellbore solutions, on AWS.
2. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Investors: 72
ConocoPhillips (NYSE:COP) is a major global energy company with a diverse range of conventional and unconventional assets spread across North America, Europe, and Asia. Its balanced portfolio and strategic operations make it well-positioned to benefit from current trends in the energy market.
On October 23, ConocoPhillips (NYSE:COP) and SEFE (Securing Energy for Europe), a global energy company owned by the Federal Government of Germany entered into a long-term partnership. According to the agreement, ConocoPhillips (NYSE:COP) will supply SEFE with up to 9 billion cubic meters of natural gas over the next 10 years. This strategic partnership aims to strengthen the security of energy supply for Germany and Europe, providing a stable and reliable source of natural gas to meet the region’s growing energy demands.
ConocoPhillips (NYSE:COP) has a large and growing European supply portfolio, including Norwegian natural gas production and LNG imports. Meanwhile, SEFE’s European customer portfolio requires around 20 billion cubic meters of natural gas per year. The first gas deliveries under the agreement have already been successfully completed, with ConocoPhillips (NYSE:COP) set to deliver the natural gas to SEFE at various trading hubs across Europe over the next decade.
In May, ConocoPhillips (NYSE:COP) also announced its plan to acquire Marathon Oil in an all-stock deal valued at $22.5 billion including $5.4 billion of net debt. This acquisition is expected to immediately enhance ConocoPhillips’ (NYSE:COP) earnings, cash flow, and return of capital per share, with cost and capital savings anticipated within the first full year post-closing. The transaction is expected to be finalized in the fourth quarter of 2024, pending regulatory approvals and other customary conditions.
1. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Investors: 92
Exxon Mobil Corporation (NYSE:XOM) is a global leader in the energy sector, with a broad range of operations that include exploration and production, refining, manufacturing, and various activities across its upstream, downstream, and chemical segments. The company is making significant investments in low-carbon technologies, such as biofuels and hydrogen while continuing to dominate the oil and gas industry.
Exxon Mobil Corporation (NYSE:XOM) has plans to invest $10 billion in offshore oil operations in Nigeria, according to a statement from the Nigerian presidency on September 26 reported by Reuters. The investment will focus on developing the Owo project, a deep-water project estimated to cost $10 billion. The company also plans to increase its oil output by 50,000 barrels per day over the next few years, with an annual investment of $2.5 billion.
The investment is part of the company’s efforts to expand its operations in Nigeria. Exxon Mobil Corporation (NYSE:XOM) is working closely with the Nigerian government to secure favorable fiscal arrangements as Nigeria’s oil production has increased by 10.15% in the second quarter, averaging 1.41 million barrels per day.
On October 24, Federal regulators also issued Exxon Mobil Corporation (NYSE:XOM) and Qatar Energy LNG joint venture a 3-year extension to finish building the Golden Pass LNG plant. The extension was granted due to delays when the lead construction contractor Zachry Holdings filed for bankruptcy in March when the project was found to cost at least $2.40 billion over the original budget. The project was a former gas-import terminal that was converted to process natural gas for LNG exports and is one of two largest LNG facilities in the US which is expected to significantly expand.
While we acknowledge the potential of Exxon Mobil Corporation (NYSE:XOM) to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than XOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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