Furthermore, the Energy Information Administration (EIA) last month reported that oil production in the U.S. surpassed the 7 million barrels per day mark, which is the highest level in nearly 20 years. Despite a projection of a just a 0.3% increase in domestic oil demand, the EIA expects U.S. oil production to increase 14% to 7.3 million barrels a day in 2013. With all this in mind, and if these projections come to fruition, here are a few companies that will allow you to profit from the coming oil surge in the United States.
Here comes the boom
BP plc (ADR) (NYSE:BP) is a $130 billion oil juggernaut that made news when its Chief Executive Officer Robert Dudley recently suggested on Bloomberg Television that the United States would be 99% energy independent by 2030.
While at first glance it might not seem logical to advocate investing in a company based in the United Kingdom in order to capitalize on an oil boom in the United States, it’s worth noting that the U.S. plays a major role in BP’s success both in the present and going forward. BP expects to generate $30 billion in operating cash flow in 2014, and the United States will play a pivotal role in fulfilling that goal.
BP has considerable operations in Alaska, operating 13 oil fields and four pipelines, and also owns a significant interest in six other producing fields. In addition, BP has three downstream refineries and three petrochemicals sites located in the U.S. Moreover, despite the lingering effects from the 2010 spill, BP remains one of the largest lease-holders and producers of oil and gas in the Gulf of Mexico region.
U.S.-based peer Chevron Corporation (NYSE:CVX) has considerable operations in the United States and is poised to profit handsomely from the American oil boom. Chevron Corporation (NYSE:CVX) operates more than 50,000 productive oil wells within the United States. In addition, Chevron Corporation (NYSE:CVX) produced 655,000 barrels per day of oil and oil equivalents within the U.S. last year, representing more than a quarter of the company’s total output. This total included 153,000 barrels per day of crude oil produced from the Gulf of Mexico alone.
An alternative strategy would be to purchase stock in oil and gas Master Limited Partnerships, which are excellent income-producing investments. MLPs such as Enbridge Energy Partners, L.P. (NYSE:EEP) operate storage facilities and pipelines, which they use to hold and transport oil, gas, and refined products. Customers of these products include major oil companies, energy producers and shippers, local distribution companies and businesses across many industries.
Enbridge Energy Partners, L.P. (NYSE:EEP)’s Liquids segment operates a system that spans approximately 1,900 miles and includes approximately 5,100 miles of pipe, as well as 72 crude oil storage tanks with a capacity of approximately 14 million barrels in the United States.
Stocks that pump out big returns
While BP was no doubt adversely affected by the 2010 Gulf of Mexico spill, the company has shown measurable progress since then. Including impacts from the spill, BP generated $20.4 billion in operating cash flow last year. As a result, the company was not only able to restore its quarterly dividend in early 2011, but it has raised its dividend twice since then.
Chevron Corporation (NYSE:CVX) is an extremely well-run company, and its great performance has been backed up by its share price returns over the last few years. Since the beginning of 2010, the stock is up more than 45%, not even including its strong 3% dividend.
Chevron Corporation (NYSE:CVX) reported full-year 2012 diluted earnings per share of $13.32, down slightly from $13.44 per share the year prior. Total revenue increased about 1% during the fourth-quarter year-over-year. Furthermore, the company is in a very strong financial position. At year end, cash and equivalents on the books totaled almost $22 billion, while the company’s net debt stands at only $12.2 billion.
Enbridge Energy Partners, L.P. (NYSE:EEP) reported a challenging 2012, with adjusted net income per unit coming in at $.99 versus $1.39 the previous year. This underperformance was driven primarily by struggles in the company’s natural gas operations. Nevertheless, the company raised its quarterly dividend during 2012 and now offers investors a tantalizing 7.5% yield.
The Foolish takeaway
Each of these three stocks is extremely well run and should continue to flow profits through to shareholders via big dividends and share buybacks for many years to come. The impending oil and gas boom in the United States means further potential for these companies. Investment-worthy stocks are in abundance within the energy sector, and companies engaged in the exploration, production, and development of oil and gas represent some of the market’s best opportunities going forward.
Chevron Corporation (NYSE:CVX) and BP both trade for modest trailing price-to-earnings ratios under 10 and offer dividends of 3% and 5.3%, respectively, while Enbridge Energy Partners, L.P. (NYSE:EEP) offers a dividend yield significantly higher than its peers. All three stocks offer great potential for fantastic future returns, and each should be on your watch list.
The article Profit From The Coming U.S. Oil Boom With These Stocks originally appeared on Fool.com and is written by Robert Ciura.
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