In this article, we will look at the 10 Most Profitable Energy Stocks To Invest In.
Global Energy Demand Set to Soar
The International Energy Agency (IEA) projects a significant increase in global energy demand, with an annual growth rate of 3.4% projected until 2026. The majority of this demand, approximately 85%, is expected to come from China and India, with India’s energy demand alone forecasted to grow at an impressive 6% annually until 2026, driven by robust economic growth and rising household consumption. Southeast Asia is also expected to experience a substantial increase in electricity demand, with a 5% annual growth rate predicted until 2026.
In contrast, the United States is expected to see a more moderate increase in electricity demand, primarily driven by the growing need for data centers. The electricity usage by data centers, artificial intelligence, and cryptocurrency is expected to double to 1,000 TWh by 2026.
However, the IEA notes that the rise in electricity generation from low-emission sources will meet global demand growth over the next three years. Renewable energy is anticipated to surpass coal as the leading energy source by early 2025, marking a significant milestone in the global transition towards cleaner energy. This shift towards renewable energy is expected to play a crucial role in meeting the world’s growing energy needs while reducing greenhouse gas emissions and mitigating the impacts of climate change.
Energy Industry to Require Balanced Approach
In an interview on CNBC on September 18, ConocoPhillips CEO Ryan Lance said that he is optimistic about the future of the energy industry. Lance highlighted that the US is well-positioned to supply the growing demand for natural gas, particularly in Europe. He noted that the shale revolution in the US has been a “remarkable” game-changer for the industry and that the country is now a major player in the global energy market. Lance also pointed out that the US has a huge natural gas supply, which provides an opportunity to keep energy prices low and support growing power demand and electrification.
In addition, Lance discussed the need for a diverse energy mix to meet growing power demand in the US and globally. He noted that while renewable energy sources are growing, they are not yet sufficient to meet demand and that other forms of energy, including coal and nuclear, will still be needed. He cited the example of California, which plans to import more electricity from coal-powered plants in South Dakota and Wyoming, despite its efforts to reduce greenhouse gas emissions. This, Lance argued, highlights the complexity of the energy landscape and the need for a balanced approach.
Lance also touched on the potential impact of interest rate decisions by the Federal Reserve on the oil and gas industry. While acknowledging that a rate cut could have some impact, Lance emphasized that what matters most is a healthy economy in the US and globally.
The growth in global energy demand poses a significant challenge, it is essential to prioritize sustainable and low-emission energy sources to meet the growing demands. With that in context let’s take a look at the 10 most profitable energy stocks to invest in.
An aerial view of a power plant, symbolizing the company’s investments in energy infrastructure sector.
Our Methodology
For this article, we used Finviz and Yahoo Finance stock screeners plus online rankings to compile an initial list of the 80 largest companies in the energy sector by market cap. From that list, we narrowed our choices to 10 companies with positive TTM net income and 5-year net income growth from reputable sources including SeekingAlpha (which provided insights into 5-year growth rates) and Macrotrends (which supplied information on trailing twelve-month (TTM) net income). Then we sorted the stocks in ascending order, according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024.
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 Most Profitable Energy Stocks To Invest In
10. Cenovus Energy (NYSE:CVE)
TTM Net Income: $3.50 Billion
5-Year Net Income CAGR: 74.34%
Number of Hedge Fund Holders: 46
Cenovus Energy (NYSE:CVE) is a prominent Canadian oil company that specializes in oil sand production and refining and owns diverse assets in Western Canada, the United States, and other international locations. The company’s operations encompass a range of conventional oil and gas fields, oil sands, and a refining segment comprising two refineries in the United States.
In the second quarter, Cenovus Energy (NYSE:CVE) delivered a notable production beat, producing 800,800 barrels of oil equivalent per day, exceeding consensus expectations. The company also upgraded its guidance for downstream performance for the year’s second half, further enhancing its positive outlook. Additionally, the company has a strong track record, with its net income increasing by a CAGR of 74.34% over the last 5 years.
Cenovus Energy’s (NYSE:CVE) net income for the twelve months ending June 30 was $3.50 billion, a 22.51% increase year-over-year. The company has successfully achieved its net debt target of $4.0 billion and is now shifting its focus towards returning value to shareholders. As part of this strategy, the company will allocate 100% of its excess free cash flow towards share repurchases, which will not only reduce its share count but also increase earnings per share. This move is expected to create long-term value for investors and demonstrate the company’s commitment to delivering returns.
Cenovus Energy (NYSE:CVE) presents a compelling investment opportunity for those seeking a high-quality energy company with strong growth prospects. As of the second quarter, its stock was held by 46 hedge funds with stakes worth $1.21 billion.
9. Marathon Petroleum (NYSE:MPC)
TTM Net Income: $7.18 Billion
5-Year Net Income CAGR: 20.85%
Number of Hedge Fund Holders: 50
Marathon Petroleum (NYSE:MPC) is one of the largest petroleum refining and marketing companies in the United States and provides transportation fuels, lubricants, and petrochemicals. The company operates a vast network of refineries and pipelines and has a significant presence in midstream logistics.
Marathon Petroleum’s (NYSE:MPC) cash flow has been robust, with $2.7 billion in cash flow from operations (CFFO) and modest capital expenditures, resulting in free cash flow (FCF) of $2.2 billion. This has enabled the company to maintain a nearly 15% dividend yield and aggressively repurchase shares. Since mid-2021, Marathon Petroleum (NYSE:MPC) has reduced its outstanding share count by almost 50% and is expected to continue this trend. The company’s outlook is positive,
Marathon Petroleum (NYSE:MPC) owns 64% of MPLX (NYSE:MPLX), which provides a strong foundation for its business. In Q2, Marathon Petroleum (NYSE:MPC) received a $550 million quarterly distribution from the company. Marathon Petroleum (NYSE:MPC) has generated strong EBITDA with quarter-over-quarter growth. The company’s net income for the twelve months ending June 30 was $7.18 billion, representing a 20.85% CAGR over the past 5 years.
Marathon Petroleum (NYSE:MPC) expects roughly 2.6 million barrels per day in throughput, with $5.35 per barrel in operating cost. The company’s distribution costs come out to $6.5 per barrel, and spreads remain relatively strong, supporting continued returns.
Marathon Petroleum’s (NYSE:MPC) dividend yield of nearly 15% and aggressive share repurchases make it an attractive investment opportunity for those looking to benefit from the energy sector. As of the second quarter, 50 hedge funds have invested a total of $2.21 billion in Marathon Petroleum’s (NYSE:MPC) stocks. Elliott Management holds stocks worth $1.27 billion and is the largest shareholder in the company, according to Insider Monkey’s database.
8. Occidental Petroleum (NYSE:OXY)
TTM Net Income: $3.89 Billion
5-Year Net Income CAGR: 3.78%
Number of Hedge Fund Holders: 62
Occidental Petroleum (NYSE:OXY) is a US based oil and gas exploration company with operations in the U.S., Middle East, and Latin America. The company is known for its strong presence in shale oil production, particularly in the Permian basin in the southwestern part of the United States.
Occidental Petroleum’s (NYSE:OXY) acquisition of CrownRock at the end of FY 2023 for approximately $12 billion has added approximately 170,000 barrels of oil equivalent per day to its production. The acquisition was conducted mainly because of CrownRock’s assets in the Midland basin, which are complementary to Occidental Petroleum’s (NYSE:OXY) focus in the Permian basin. The transaction was completed at the beginning of August, and the outlook for production growth for Occidental Petroleum (NYSE:OXY) is favorable.
In Q2, Occidental Petroleum (NYSE:OXY) generated $1.30 billion in free cash flow, up 83% quarter over quarter, a large portion of the free cash flow went into debt repayments, and the company has guided for $1.9 billion for incremental debt reductions in the month of August, following the close of the CrownRock acquisition.
As of June 30, Occidental Petroleum (NYSE:OXY) reported a TTM net income of $3.89 billion, an increase of 3.78% over the last 5 years. Occidental Petroleum’s (NYSE:OXY) diversified portfolio of energy assets, including oil & gas, chemical, midstream, and low-carbon energy investments makes it well-positioned to benefit from the growing demand for oil and gas.
7. Chevron (NYSE:CVX)
TTM Net Income: $18.72 Billion
5-Year Net Income CAGR: 4.91%
Number of Hedge Fund Holders: 64
Chevron (NYSE:CVX) is a leading vertically integrated company that operates globally in the oil and gas exploration, production, and refining sectors. In addition to its traditional operations, Chevron (NYSE:CVX) is also investing in green energy technologies and services, including wind, solar, and biofuels. The company has made significant strides in renewable energy, operating a 16.5 MW wind farm in Wyoming that supplies power to 13,000 homes annually and a 49 MW geothermal facility in California that powers 40,000 homes each year. Furthermore, Chevron (NYSE:CVX) distributes renewable diesel made from sources such as vegetable oils and animal fats at California terminals, offering diesel blends containing 6-20% renewable content.
In May, Chevron (NYSE:CVX) achieved a significant breakthrough by successfully running a gas turbine on a 60% hydrogen fuel blend for several days. The turbine is located adjacent to Chevron’s (NYSE:CVX) Pipeline & Power Business Unit facility in California and delivers power and steam for nearby oil fields. This advancement is crucial for reducing carbon emissions in industrial processes, such as manufacturing and data centers, and could accelerate the adoption of hydrogen technologies.
Chevron’s (NYSE:CVX) net income has increased by a CAGR of 4.91% over the last 5 years. For the twelve months ending June 30, the company’s net income stood at $18.72 billion. Chevron (NYSE:CVX) is well-positioned to continue to dominate the energy market and deliver long-term value to shareholders. As of the second quarter, 64 hedge funds have invested $22.40 billion in the company.
6. Cheniere Energy (NYSE:LNG)
TTM Net Income: $4.46 Billion
5-Year Net Income CAGR: 94.80%
Number of Hedge Fund Holders: 65
Cheniere Energy (NYSE:LNG) is the largest U.S. exporter of liquefied natural gas (LNG), supplying energy to global markets. The company’s Sabine Pass and Corpus Christi facilities are key export terminals and play a vital role in meeting the growing demand for cleaner energy sources worldwide.
Cheniere Energy (NYSE:LNG) has seen impressive financial growth, driven by the increasing demand for LNG as a transition fuel in the global energy market. The company’s ownership of the largest and third-largest LNG terminals in the United States, Sabine Pass and Corpus Christi, provides a unique competitive advantage. Cheniere Energy (NYSE:LNG) has long-term contracts for 95% of the total anticipated production for the next 16 years.
The global demand for natural gas is expected to grow by 10-15% by 2030 and could increase as much as two times by 2050, driven by increased demand for electricity and industrial decarbonization. Cheniere Energy (NYSE:LNG) is well-positioned to benefit from this growth, with its LNG terminals accounting for around 11% of the total global liquefaction capacity.
Cheniere Energy (NYSE:LNG) is focused on reducing debt, declaring and growing dividends, share repurchases, and investing in production capacity growth. The company has also announced new 2027 targets, including buying back an additional 10% of its market capitalization, growing its dividend by 10%, and adding another 25 mtpa of production capacity.
Cheniere Energy’s (NYSE:LNG) unique assets and long-term contracts make it an attractive investment opportunity for those looking to invest in the energy sector. The company’s net income for the twelve months ending on June 30 was $4.46 billion, representing an impressive CAGR of 94.80%.
5. Schlumberger (NYSE:SLB)
TTM Net Income: $4.42 Billion
5-Year Net Income CAGR: 16.07%
Number of Hedge Fund Holders: 67
Schlumberger (NYSE:SLB) is a leading oilfield services company that provides solutions for the exploration and development of oil and gas resources in over 85 countries. The company is a significant player in the geothermal energy sector through its GeothermEx division, which offers a variety of services, from geothermal power generation to geothermal heating and cooling for buildings. Schlumberger (NYSE:SLB) is involved in approximately 80% of the world’s geothermal projects due to its expertise in well construction, digital solutions, and field development.
On June 24, Schlumberger (NYSE:SLB) announced a collaboration with Ormat Technologies (NYSE:ORA), a manufacturer and operator in the geothermal sector. The partnership aims to bring together Schlumberger’s (NYSE:SLB) expertise in reservoir characterization, well construction, and production technologies with Ormat Technologies’ (NYSE:ORA) specialization in geothermal project development, power plant design, and operations to deliver integrated geothermal solutions that minimize project risks, improve economics, and ensure long-term reliability. The partnership covers both traditional geothermal solutions and emerging technologies such as enhanced geothermal systems (EGS) and advanced geothermal solutions (AGS).
Schlumberger (NYSE:SLB) has experienced significant earnings growth. For the twelve months ending June 30, the company’s net income was $4.41 billion, a 12.11% increase year-over-year. Additionally, its net income has compounded at a CAGR of 16.07% over the last 5 years.
4. Constellation Energy (NASDAQ:CEG)
TTM Net Income: $2.39 Billion
5-Year Net Income CAGR: 35.27%
Number of Hedge Fund Holders: 71
Constellation Energy (NASDAQ:CEG) provides energy products such as natural gas and related services across North America. The company is a major player in the nuclear energy sector and generates 10% of the United States’ carbon-free electricity. Constellation Energy (NASDAQ:CEG) is committed to investing in sustainable energy solutions and has taken significant steps to reduce its environmental impact.
In Q1, Constellation Energy (NASDAQ:CEG) issued a 30-year corporate green bond worth $900 million to fund upgrades to its nuclear plants, clean hydrogen production, and energy storage systems. The company has also secured long-term sustainable energy contracts with major tech firms, including Microsoft and Google, which provide a stable revenue stream. Additionally, Constellation Energy (NASDAQ:CEG) is investing $800 million in its Byron and Braidwood nuclear plants in Illinois, which is expected to increase their energy output by 158 megawatts. Constellation Energy (NASDAQ:CEG) is also investing $350 million to upgrade the Criterion wind project in Maryland.
Constellation Energy (NASDAQ:CEG) is poised for significant growth. The company is projected to grow its earnings by 45.84% this year. Over the last 5-years, Constellation Energy (NASDAQ:CEG) has grown its net income by an impressive CAGR of 35.27%. The company’s net income for the twelve months ending June 30 was $2.39 billion, a 208.91% increase year-over-year. This growth was driven by its investments in sustainable energy solutions and its long-term contracts with major tech firms.
As of the second quarter, 71 have invested in the company’s stock, with a total investment of $3.78 billion. Coatue Management holds stocks valued at $982.90 million and is the largest shareholder in the company as of June 30.
3. ConocoPhillips (NYSE:COP)
TTM Net Income: $10.69 Billion
5-Year Net Income CAGR: 8.39%
Number of Hedge Fund Holders: 72
ConocoPhillips (NYSE:COP) is one of the largest independent exploration and production companies globally, with operations across North America, Europe, and Asia. The company has a balanced portfolio of conventional and unconventional assets.
In May, ConocoPhillips (NYSE:COP) announced an agreement to acquire Marathon Oil for $22.5 billion, which aims to increase its upstream operations and enhance its earnings and free cash flow potential, particularly in key basins such as the Bakken, Permian, and Eagle Ford. This strategic move has positioned ConocoPhillips (NYSE:COP) for accelerating capital returns, with the company generating $2.1 billion in free cash flow in Q2, of which $1.9 billion was returned to shareholders through stock buybacks and dividends. Furthermore, the company’s upstream operations offer significant earnings potential due to a rise in the petroleum market.
ConocoPhillips’ (NYSE:COP) financial performance is underpinned by its solid production growth, which reached 1,945 MBOED in Q2, representing an 8% year-over-year increase. The company’s average petroleum price of $81.30 per barrel in Q2 was 10% higher than the year-earlier period, which contributed to its solid earnings and free cash flow performance.
The OPEC+ is providing support for petroleum prices, which are trading at around $75 per barrel as of October 5. ConocoPhillips (NYSE:COP) is well-positioned to continue generating strong earnings and free cash flow in the coming quarters. The company has increased its net income over the past 5 years with a CAGR of 8.39%. For the year ended on June 30, ConocoPhillips (NYSE:COP) reported a net income of $10.68 billion. ConocoPhillips (NYSE:COP) offers an attractive opportunity due to its production growth, free cash flow generation, and dividend paying capabilities.
2. NextEra Energy (NYSE:NEE)
TTM Net Income: $6.32 Billion
5-Year Net Income CAGR: 13.60%
Number of Hedge Fund Holders: 73
NextEra Energy (NYSE:NEE) is a global leader in the production of wind and solar energy and battery storage technology and plays a crucial role in the shift to a low-carbon economy. Through its subsidiaries, the company serves millions of customers and has made significant investments in clean energy. NextEra Energy (NYSE:NEE) operates through two divisions: Florida Power & Light (FPL), an electric utility, and NextEra Energy Resources (NEER), a clean energy producer and battery storage company.
NextEra Energy Resources (NEER) has established itself as significant in the development, construction, and management of long-term clean energy assets, primarily in the United States and Canada. With over two decades of experience in the clean energy sector, NEER has developed a significant competitive edge. Between 2019 and 2022, the company generated 56% of the total wind energy and 38% of the overall clean energy produced in the United States NEER’s clean energy portfolio comprises approximately 34 gigawatts (GW) of capacity, which includes 24 GW from wind, 7 GW from solar, and 2 GW from nuclear power. About 93% of NEER’s revenue is generated by long-term Power Purchase Agreements with technology firms and data centers, and NextEra Energy’s (NYSE:NEE) net income has grown at a CAGR of 13.60% over the past 5 years.
NextEra Energy’s (NYSE:NEE) business is poised for significant expansion, driven by its dominant position in the clean energy market.
1. ExxonMobil (NYSE:XOM)
TTM Net Income: $34.16 Billion
5-Year Net Income CAGR: 14.03%
Number of Hedge Fund Holders: 92
ExxonMobil (NYSE:XOM) is one of the largest and most prominent publicly traded oil and gas companies in the world, boasting a vast and diversified portfolio of operations that encompass a wide range of critical energy-related activities, from exploration and production to the refining and manufacturing of petroleum products and a diverse portfolio of upstream, downstream, and chemical businesses. ExxonMobil (NYSE:XOM) has been making strategic investments in low-carbon technologies, including biofuels, carbon capture, and hydrogen while maintaining its leadership in the traditional oil and gas sector.
On May 3, ExxonMobil (NYSE:XOM) completed the acquisition of Pioneer Natural Resources (NYSE:PXD) for $60 billion. The acquisition is expected to significantly boost Exxon Mobil’s oil and gas production, enhance operational efficiency, and create synergies across various businesses. The company’s updated revenue structure reflects the increased contribution from the Upstream segment, which is expected to account for 10.5% of total revenue in 2024 and 11.5% in 2025. ExxonMobil’s (NYSE:XOM) EBITDA is expected to increase by 8% in 2024 and 7% in 2025, driven by the higher forecast for the Upstream segment’s revenue.
ExxonMobil (NYSE:XOM) is a compelling investment opportunity in the energy sector. The company’s ability to adapt to changing market conditions and its commitment to invest in its businesses position it for long-term success. As of June 30, the company’s stock was held by 92 hedge funds with stakes worth $6.18 billion.
While we acknowledge the potential of Exxon Mobil (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.
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