In this article, we discuss the 12 best crude oil stocks to buy as tensions rise.
Amid the bear market of 2022, oil stocks stood out as some of the few success stories. While inflation negatively impacted consumer spending and business sentiment, it had a positive effect on the price of crude oil. Additionally, Russia’s invasion of Ukraine further boosted the performance of oil stocks, which managed to achieve significant gains, despite the S&P 500 index’s approximately 20% loss for the year. However, 2023 tells a different tale. Crude oil prices have experienced a substantial decrease, nearly halving from their 2022 peak at around $120 per barrel. As a consequence, oil stocks have faced challenges in the current year.
With that said, oil prices had already climbed to nearly $98 per barrel in mid-September following the decision by Saudi Arabia and Russia to extend their voluntary production cuts until the end of the year. This move, along with dwindling crude oil and distillate inventories, had drawn considerable attention and pushed prices higher. According to the IEA Oil Market Report (OMR), the market began to focus on the possibility of “higher for longer” interest rates that might impede economic and demand growth. However, as October began, benchmark Brent futures experienced a significant drop of over $12 per barrel, falling to $84 per barrel. This shift was due to concerns about deteriorating macroeconomic indicators and signs of demand decline in the United States, exemplified by a sharp drop in gasoline deliveries to their lowest levels in two decades.
In addition, the recent surge in geopolitical tensions in the Middle East, a region responsible for more than a third of the world’s seaborne oil trade, has left financial markets on edge. Following Hamas’ unexpected attack on Israel on October 7, traders wasted no time factoring in a risk premium of $3-4 per barrel as markets opened. Since then, oil prices have somewhat stabilized, with Brent futures trading at approximately $87 per barrel at the time of this writing. While there hasn’t been a direct impact on physical oil supply, markets will remain in a state of anticipation as the crisis continues to unfold.
On the other hand, data from China has shown positive signs as the year persisted. In a September report, the research firm Wood Mackenzie predicted that 2023 would mark another year of robust post-COVID recovery. The company anticipates a 2.0 million barrels per day increase in global oil demand for the year, only slightly below the figures from 2022. Wood Mackenzie noted that, despite growth uncertainties, China would be a significant contributor to this expansion, rebounding from the extensive pandemic-related lockdowns experienced in the previous year. Currently, global demand is hitting a new record high, surpassing 102 million barrels per day.
In today’s market, crude oil stocks may exhibit volatility, yet several of them continue to stand out as some of the most profitable companies globally, providing decent shareholder returns. A few notable crude oil stocks that warrant investors’ attention include Exxon Mobil Corporation (NYSE:XOM), Occidental Petroleum Corporation (NYSE:OXY), and Schlumberger Limited (NYSE:SLB).
Aerial view of a major oil rig in the middle of the sea, pumping crude oil.
Our Methodology
For our list of the best crude oil stocks to invest in, we have chosen the most noteworthy crude oil companies that are operating in the energy sector. We have organized the list based on the hedge fund sentiment regarding these stocks, as determined from Insider Monkey’s database, which tracks 910 top-tier hedge funds as of the close of the second quarter of 2023.
12. Enbridge Inc. (NYSE:ENB)
Number of Hedge Fund Holders: 28
Enbridge Inc. (NYSE:ENB) is a multinational energy and pipeline company based in Calgary, Alberta, Canada. The company maintains an extensive network of pipelines spanning across Canada and the United States, facilitating the transportation of various energy resources, including crude oil, natural gas, and natural gas liquids. Additionally, Enbridge Inc. is involved in renewable energy generation. Notably, Enbridge oversees one of the largest oil pipeline systems globally and is responsible for transporting approximately 30% of the oil produced in North America.
Analysts at TD Cowen reaffirmed their Buy rating for Enbridge Inc. shares on August 8, along with a stock price target of $58.
Our hedge fund data for the second quarter shows 28 hedge funds holding stakes in Enbridge Inc.. Their total stake value in the company was $449.7 million. GQG Partners was the most prominent shareholder in Enbridge Inc. at the end of the second quarter, holding 6.4 million shares in the company.
Alongside Enbridge Inc., Exxon Mobil Corporation, Occidental Petroleum Corporation, and Schlumberger Limited are some of the best crude oil stocks to buy.
11. Halliburton Company (NYSE:HAL)
Number of Hedge Fund Holders: 39
Halliburton Company (NYSE:HAL) is an oilfield service provider that caters to the upstream oil and gas sector across all stages of the reservoir’s lifecycle. The company’s services encompass activities ranging from hydrocarbon discovery and geological data management to drilling, formation assessment, well construction, completion, and production optimization.
On October 4, Citigroup increased the target for Halliburton Company stock from $42.00 to $46.00. This adjustment mirrors analyst Scott Gruber’s positive outlook on the company’s future earnings and operational efficiency. Gruber’s “Buy” rating is supported by his anticipation that Halliburton’s investments in electronic fracking, combined with strong execution, will lead to market share growth and improvements in Completion and Production (C&P) margins.
After analyzing the investment activities of 910 hedge funds for the second quarter of 2023, Insider Monkey identified 39 of them that had invested in Halliburton Company. The most significant shareholder of Halliburton Company in our database is Richard S. Pzena’s Pzena Investment Management, with ownership of 7.4 million shares valued at $244 million.
Carillon Eagle Mid Cap Growth Fund made the following comment about Halliburton Company in its Q3 2023 investor letter:
“Halliburton Company (NYSE:HAL) provides equipment and services to the global energy industry. The stock was an impressive outperformer in the quarter, as the recent sharp increase in oil prices should translate to healthy levels of North American shale activity in the remainder of the year and into 2024. Halliburton also is poised to benefit from the ongoing multi-year international and offshore upstream investment cycle.”
10. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 42
Marathon Petroleum Corporation (NYSE:MPC) is a U.S.-based company primarily involved in petroleum refining, marketing, and transportation. Its headquarters are located in Findlay, Ohio. It was formerly a wholly-owned subsidiary of Marathon Oil until a corporate spin-off in 2011. In addition to being one of the best crude oil stocks, Marathon Petroleum Corporation is also one of the biggest pipeline companies in the world with a network of nearly 14,000 miles.
On October 25, Marathon Petroleum Corporation announced a dividend of $0.825 per share on common stock, reflecting a growth of approximately 10% compared to its previous dividend of $0.75 per share. The dividend will be disbursed on December 11, 2023, to shareholders on record on November 16, 2023. Moreover, MPC has sanctioned an additional $5 billion share repurchase authorization. This new authorization is in addition to its previous authorization, which had roughly $4.3 billion remaining as of September 30.
In the second quarter of 2023, the company made its way to 42 hedge fund portfolios, compared to 58 in the previous quarter. Paul Singer’s Elliott Management was the biggest stakeholder of Marathon Petroleum Corporation in Q2 with over 11 million shares worth approximately $1.29 billion.
9. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 44
Diamondback Energy, Inc. (NASDAQ:FANG) is a U.S.-based energy company exclusively operating within the Permian Basin. In 2022, the company achieved a daily production of approximately 386 thousand barrels of oil equivalent and boasted proven reserves amounting to 2.3 billion barrels of oil equivalent, with petroleum accounting for 53% of the total.
As of August 1, the company declared a 5% increase in its quarterly dividend, raising it to $0.84 per share. The company has a robust track record of consistently paying and boosting its dividends. On October 29, the stock presented a dividend yield of 4.30%.
Out of the 910 hedge funds tracked by Insider Monkey, 44 hedge funds were long Diamondback Energy, Inc.. A notable stakeholder of Diamondback Energy, Inc. was Ken Griffin’s Citadel Investment Group which owns a $166.25 million stake in the company.
8. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Holders: 44
Founded in 1989, Chesapeake Energy Corporation (NASDAQ:CHK) specializes in exploring and responsibly developing key assets within three prominent U.S. oil and gas regions: the Eagle Ford, Haynesville, and Marcellus Shales. The company is headquartered in Oklahoma City, known as a major hub for the natural gas and oil industry. Throughout the entire year of 2022, the company achieved a daily production rate of around 4.0 billion cubic feet equivalent (bcfe) per day. This production was primarily comprised of approximately 90% natural gas and 10% total liquids. The company employed an average of 14 drilling rigs to complete the drilling of 217 wells, and 215 of those wells were successfully brought into production.
Chesapeake Energy Corporation is in the initial stages of considering the acquisition of its fellow gas industry counterpart, Southwestern Energy, which is currently assessed at a valuation exceeding $8 billion. These preliminary discussions between Chesapeake and Southwestern were reported by Reuters on October 17. In the event of a merger between the two companies, they would surpass EQT Corporation to become the largest exploration and production enterprise focused on natural gas in the United States, as measured by market value.
As of the end of the second quarter of this year, Insider Monkey’s survey of 910 hedge funds identified 44 that had invested in Chesapeake Energy Corporation. Among these, the largest stakeholder is Oaktree Capital Management, led by Howard Marks, with holdings valued at $615 million.
7. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 45
Devon Energy Corporation (NYSE:DVN) is an energy company focused on hydrocarbon exploration in the United States. The company is incorporated in Delaware and maintains its primary corporate headquarters at the Devon Energy Center, a 50-story building located in Oklahoma City, Oklahoma. The company produced more than $1.4 billion in operating cash flow in Q2 and, in the same quarter, distributed $690 million to its shareholders through dividends and stock buybacks.
Devon Energy Corporation disclosed on August 1 that it plans to issue its usual quarterly dividend of $0.20 per share, accompanied by an extra dividend of $0.29 per share, culminating in a total quarterly dividend of $0.49 per share.
A total of 45 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Devon Energy Corporation. The biggest stakeholder of Devon Energy Corporation was Donald Yacktman’s Yacktman Asset Management which owns a $146 million stake in the company.
6. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 54
Pioneer Natural Resources Company (NYSE:PXD), based in Irving, Texas, specializes in hydrocarbon exploration. The company’s operations are centered in the Cline Shale, a segment of the Spraberry Trend within the Permian Basin, where it holds the largest acreage. During August, JPMorgan raised the rating on three oil stocks, which included Pioneer Natural Resources Company, shifting them from “Neutral” to “Overweight.” The firm highlighted an improved risk-reward outlook for these three companies in the coming 6-12 months.
As of Q2 2023 end, 54 out of the 910 hedge funds part of Insider Monkey’s database were Pioneer Natural Resources Company’s investors. Out of these, the firm’s biggest shareholder is Donald Yacktman’s Yacktman Asset Management since it owns 1.28 million shares that are worth $264.24 million.
Ave Maria World Equity Fund made the following comment about Pioneer Natural Resources Company in its Q1 2023 investor letter:
“Pioneer Natural Resources Company (NYSE:PXD) is one of the largest independent E&P companies in the United States focused on the Permian Basin. Pioneer is a low-cost producer in the Permian basin and can generate free cash flow when the price of oil is more than $30 per barrel. Pioneer was one of the first companies in the industry to embrace a disciplined investment framework focused on returning excess capital to shareholders during periods of high realized pricing. This framework has materially benefited shareholders given the sharp rise in the price of crude oil.”
Pioneer Natural Resources Company ranks as one of the best crude oil stocks, alongside the likes of Exxon Mobil Corporation, Occidental Petroleum Corporation, and Schlumberger Limited.
5. Schlumberger Limited (NYSE:SLB)
Number of Hedge Fund Holders: 60
Schlumberger NV, commonly referred to as SLB or Schlumberger Limited, is a prominent oilfield services company that offers advanced technology solutions for reservoir characterization, drilling, production, and processing to the oil and gas sector. The company is a comprehensive provider of products and services to the industry, spanning from exploration and production to integrated pipeline solutions designed to enhance hydrocarbon recovery.
In the third quarter, Schlumberger Limited’s international revenue experienced a 12% increase, reaching $6.6 billion compared to the same period the previous year. North America’s revenue also saw a 6% increase, although it declined sequentially due to reduced drilling activity in the onshore U.S. and the Gulf of Mexico. The company’s net income, excluding exceptional items, amounted to $0.78 per share for the three months ending on September 30, slightly surpassing the average analysts’ estimate of $0.77 per share.
A total of 60 hedge funds out of the 910 funds tracked by Insider Monkey were long Schlumberger Limited. The most significant stakeholder of Schlumberger Limited was Rajiv Jain’s GQG Partners which had a $1.7 billion stake in the company.
VGI Partners made the following comment about Schlumberger Limited in its 2022 annual investor letter:
“In addition to defence, we have focused our efforts on other new sectors where we see structural growth, including energy and medical technology. The long-term outlook for energy looks highly attractive given many years of under-investment and more recently amplified by ESG constraints and corporate discipline. Although we reviewed commodity owners (where we leveraged the expertise of the Regal resources team), we focused our efforts on the second derivative – the oil service companies. These are the picks-and-shovels of the industry and arguably the highest-quality way to gain exposure. As a result, we invested in Schlumberger Limited earlier this year and grew this to a circa 8% weight during the year (now circa 3%)”
4. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 62
ConocoPhillips (NYSE:COP), based in Houston, Texas, is an autonomous exploration and production (E&P) enterprise engaged in the global exploration, production, transportation, and marketing of crude oil, bitumen, natural gas, natural gas liquids, and liquefied natural gas.
On October 5, ConocoPhillips successfully finalized the acquisition of the remaining 50% stake in the Surmont oil sands project from TotalEnergies EP Canada Ltd. for roughly $2.7 billion in cash (equivalent to CAD 3.7 billion), along with potential future contingent payments amounting to approximately $0.3 billion (equivalent to CAD 0.4 billion). With this transaction, ConocoPhillips has attained full ownership, holding a 100% stake in Surmont, and will retain its role as the project’s operator.
A total of 62 hedge funds tracked by Insider Monkey had stakes in ConocoPhillips as of the end of the second quarter of 2023. The biggest stakeholder of ConocoPhillips was Natixis Global Asset Management’s Harris Associates which owns a $1.5 billion stake in the company.
Oakmark Select Fund made the following comment about ConocoPhillips in its second quarter 2023 investor letter:
“ConocoPhillips is one of the largest and most efficient exploration and production companies in the country. The company has an extensive resource base of high-quality drilling inventory in the U.S. and various international locations as well as a growing liquified natural gas business. In our view, the depth and quality of ConocoPhillips’s inventory is a competitive differentiator that is not fully captured in today’s share price. Over the next 10 years, we believe ConocoPhillips will be able to return more than 100% of its current market cap to shareholders via dividends and share repurchases while growing its production at a mid-single-digit annual pace. We believe ConocoPhillips is also among the best managed companies in the oil and gas industry and we are impressed by its history of accretive capital allocation under CEO Ryan Lance. The stock has meaningfully underperformed the broader market year-to-date and is an attractive addition to our portfolio.”
3. Exxon Mobil Corporation (NYSE:XOM)
Number of Hedge Fund Holders: 71
Exxon Mobil Corporation, a prominent American energy company, stands out as one of our top picks for investment during bear markets. With a lineage tracing back to John D. Rockefeller’s Standard Oil, Exxon Mobil Corporation has undergone a remarkable transformation spanning 140 years. Originating as a local kerosene distributor in the United States, it has grown into a global giant, ranking among the foremost publicly traded entities in the petroleum and petrochemical sectors. Over the past five years, Exxon Mobil Corporation has experienced a significant growth of around 29%, consistently increasing dividends for an impressive 39-year streak.
On October 11, Exxon Mobil Corporation and Pioneer Natural Resources jointly unveiled a firm agreement, detailing Exxon Mobil Corporation’s acquisition of Pioneer. This merger is structured as an all-stock transaction with a total valuation of $59.5 billion, equivalent to $253 per share based on ExxonMobil’s closing price on October 5, 2023. As per the agreement’s stipulations, Pioneer shareholders will be granted 2.3234 shares of XOM for each PXD share upon completion. The overall enterprise value of this transaction, which accounts for net debt, approximates $64.5 billion.
By the end of Q2 2023, data from Insider Monkey’s database revealed that 71 hedge funds had positions in Exxon Mobil Corporation, a slight decrease from the 73 hedge funds in the previous quarter. The combined value of these holdings exceeds $3 billion.
2. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 73
Occidental Petroleum Corporation is an American company that specializes in hydrocarbon exploration within the United States and the Middle East. Additionally, the company is involved in petrochemical manufacturing activities across several locations, including the United States, Canada, and Chile. Organized in Delaware, Occidental Petroleum Corporation has its headquarters situated in Houston.
In August, Occidental Petroleum Corporation made a $1.1 billion deal to acquire Carbon Engineering Ltd, a technology supplier. This strategic move is part of Occidental’s plan to establish a series of carbon-capture facilities with the goal of addressing climate change and generating revenue. The company has ambitious plans to construct approximately 100 plants employing direct air capture (DAC) technology, which removes carbon dioxide (CO2) directly from the atmosphere, and the captured CO2 can then be stored underground or used in various applications, including the production of concrete and aviation fuel.
A total of 73 hedge funds out of the 910 hedge funds tracked by Insider Monkey had stakes in Occidental Petroleum. The biggest stakeholder of the company was Warren Buffett’s Berkshire Hathaway which had a $13.2 billion stake in the company.
1. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 73
Chevron Corporation (NYSE:CVX) is a prominent American multinational energy company with a primary focus on the oil and gas industry. Emerging as the second-largest direct descendant of Standard Oil, it was initially established as the Standard Oil Company of California. The company’s headquarters are situated in San Ramon, California, and it maintains operations across over 180 countries worldwide.
Chevron Corporation announced on October 23 that it had reached a definitive agreement with Hess Corporation to complete an all-stock transaction valued at $53 billion. Under this agreement, Chevron will acquire all outstanding shares of Hess. Chevron believes that this acquisition will enhance and broaden its portfolio, particularly highlighting the Stabroek block in Guyana, which it describes as an “exceptional” asset offering industry-leading cash margins and a low carbon footprint, promising continued production growth into the next decade.
By the end of this year’s second quarter, 73 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Chevron Corporation. Out of these, the firm’s biggest investor is Warren Buffett’s Berkshire Hathaway since it owns 123.12 million shares that are worth $19.37 billion.
The London Company Large Cap Strategy made the following comment about Chevron Corporation in its first quarter 2023 investor letter:
“Initiated: Chevron Corporation – CVX is an integrated energy and chemical producer. Its upstream segment explores for, produces, processes and transfers energy products. Its downstream segment refines and markets these products in addition to industrial plastics and fuel and lubricant additives. Among the major oil companies, CVX is the most levered to oil and gas production; it has one of the most successful exploration programs and among the best production profiles. CVX also has less exposure to the downstream business, which provides an above-peer operating margin profile and supports CVX’s return on invested capital. CVX has one of the strongest balance sheets in the oil industry with net debt/EBITDA of just 0.1x. The combination of its low cost positioning and strong balance sheet gives us greater confidence in downside protection despite its ties to a volatile commodity. We’re attracted to management’s rational approach to capital allocation, with consideration for the full cycle. In terms of capital allocation, CVX just announced a $75B share repurchase plan, and it pays a healthy 3.5% dividend. We have owned CVX in the past and it is the only Energy exposure in the Large Cap portfolio.”
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This article is originally published at Insider Monkey.
