Energy Stocks Down On Their Luck; Consider These 3: ConocoPhillips (COP), Occidental Petroleum Corporation (OXY)

Chart by author, data from Q4 2012 Earnings slides

ConocoPhillips (NYSE:COP) has a game plan. In the short run, $9.6 billion in asset sales will more than cover the funding gap. Meanwhile, stock buybacks and capex reductions from disposed assets have chipped away at total obligations. Recently, on the company’s “Analyst Day,” management explained that their high-margin growth projects will create over $6 billion in additional cash flow. This will more than offset the funding gap and allow the company to increase its already industry-leading dividend yield.

Occidental Petroleum Corporation (NYSE:OXY)

Market cap: $66.2 billion

Dividend Yield: 3.13%

Dividend CAGR: 15.8%

Production Growth: 5-8%, mostly oil

Occidental Petroleum Corporation (NYSE:OXY)  is a California based explorer and producer of mostly oil, but also natural gas and natural gas liquids. They do have a smaller midstream and chemicals business, too. Much of its production is domestic. Their largest plays include the Permian Basin of Texas and some very desirable fields in California which get Brent Crude pricing.

Occidental Petroleum Corporation (NYSE:OXY) has reached a stage where many of its biggest domestic projects in the Permian and Bakken have begun production and are already adding to the bottom line. Capital expenditure is expected to drop by $600 million while increasing production has benefited revenue growth and operational efficiencies have taken hold. Free cash flow expectations for 2013, therefore, are much higher. Construction of the Al Hosn gas plant, in which Occidental Petroleum Corporation (NYSE:OXY) has a partnership interest, will be complete in 2014 and will also add to the bottom line.

Unlike the other two, Occidental has no major negatives right now. Everything seems to be going smoothly. They are committed to a higher dividend, yet have production growth which outstrips the “supermajor” oil companies. Occidental Petroleum Corporation (NYSE:OXY) is at the top of my conviction list.

The article Energy Stocks Down On Their Luck; Consider These 3 originally appeared on Fool.com and is written by Casey Hoerth.

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