In this article, we discuss the top 10 oil and gas stocks to invest in. If you want to skip our detailed analysis of the oil and gas industry and these stocks, go directly to the Top 5 Oil and Gas Stocks to Invest In.
The oil and gas industry is seeing a continuous recovery in the post-pandemic era. Global oil consumption is expected to return to its pre-pandemic level of 100 million barrels per day (b/d) in 2022, according to a report of the International Energy Agency. Meanwhile, benchmark crude oil prices rose $15/bbl in January, breaking the $90/bbl mark for the first time since 2014 despite recent fears about the COVID-19 Omicron variant spread and geopolitical concerns.
Analysts are also optimistic about an increase in oil prices in the later quarters of this year. According to Goldman Sachs, Brent prices will reach $100 per barrel in the last two quarters of 2022, in a news published by Reuters in January. Meanwhile, Morgan Stanley expects that Brent crude will reach $90 per barrel in Q3 2021.
Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP) are some of the biggest oil and gas companies in the world. These oil giants are known by investors as consistent dividend payers.
Our Methodology
We started with the top holdings of the Energy Select Sector SPDR ETF (XLE) and ranked them using Insider Monkey’s Q4 2021 hedge fund sentiment data. We also considered each company’s positive analyst ratings, strong financial statements, and business growth potential.
Photo by Viktor Kharlashkin on Unsplash
Top Oil and Gas Stocks To Invest In
10. Kinder Morgan, Inc. (NYSE:KMI)
Number of Hedge Fund Holders: 39
Kinder Morgan, Inc. (NYSE:KMI) is one of the oil and gas stocks to invest in according to market analysts and hedge funds. In January, Barclays analyst Theresa Chen maintained an Equal Weight rating on Kinder Morgan, Inc. (NYSE:KMI) and raised her price target on the stock to $19 from $18.
Insider Monkey tracked 39 hedge funds with positions in Kinder Morgan, Inc. (NYSE:KMI) at the end of December 2021, down from 43 in the previous quarter. FPR Partners is the biggest shareholder of Kinder Morgan, Inc. (NYSE:KMI) as of Q4 2021, owning 17.8 million shares worth $283 million.
Kinder Morgan, Inc. (NYSE:KMI) transports natural gas, gasoline, crude oil, and carbon dioxide through approximately 83,000 miles of pipelines and 143 terminals across North America. In early February, Kinder Morgan, Inc. (NYSE:KMI) announced the approval and building of its renewable diesel hub in Southern California. The facility, which is slated to launch in the first quarter of 2021, will include truck racks that can produce up to 20,000 barrels per day (bpd) of blended diesel throughput.
Kinder Morgan, Inc. (NYSE:KMI), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), pays dividends to its shareholders. With a dividend yield of 6.51%, the company is one of the best oil and gas stocks to invest in.
9. Marathon Petroleum Corporation (NYSE:MPC)
Number of Hedge Fund Holders: 41
Marathon Petroleum Corporation (NYSE:MPC) operates in the refining, midstream, and retail of petroleum products. The Ohio-based oil and gas company also sells industrial products including asphalt, feedstocks, and petrochemicals.
Marathon Petroleum Corporation (NYSE:MPC) is looking into converting Phillips 66’s (NYSE:PSX) 255,600 barrel-per-day Alliance refinery in Louisiana into a renewable fuel plant in January, according to Reuters.
In early February, Marathon Petroleum Corporation (NYSE:MPC) posted fourth-quarter earnings of $774 million, up from $285 million last year. The company’s total revenue in Q4 2021 was $35.6 billion, beating estimates by $9.28 billion. Following the Q4 earnings result announcement, Cowen analyst Jason Gabelman increased his price target of Marathon Petroleum Corporation (NYSE:MPC) to $90 from $83 on February 3, maintaining an Outperform rating on the shares.
Marathon Petroleum Corporation (NYSE:MPC) is still committed to growing and extending its operations after more than 85 years in the industry which makes the company one of the oil and gas stocks to invest in. The company issued a $1.7 billion capital spending forecast for 2022 in its fourth-quarter results report, with growth capital accounting for around 80% of total spending and sustaining capital accounting for 20%.
Among the hedge funds tracked by Insider Monkey in Q4 2021, 41 funds were bullish on Marathon Petroleum Corporation (NYSE:MPC), with stakes totaling $2.22 billion. Elliott Management held the leading stake in Marathon Petroleum Corporation (NYSE:MPC), with 10.5 million shares worth $676 million.
Here is what Clark Street Value has to say about Marathon Petroleum Corporation (NYSE:MPC) in its Q4 2021 investor letter:
“During the worst of covid, I bought some LEAPs on Marathon Petroleum (MPC) as a proxy for Par Pacific (PARR) since long-dated options weren’t available on the later. Those MPC calls expire next month and I’ll take profits, with PARR I’ve reduced my position throughout the year and might sell the rest early next year, I’ve owned it for 6-7 years and it has gone nowhere, they haven’t touched the NOLs, just a difficult business that I probably don’t understand as well as I should.”
8. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 43
Pioneer Natural Resources Company (NYSE:PXD) is one of the largest independent oil and gas companies with major operations in the Permian Basin, which is one of the world’s most productive oil fields. Pioneer Natural Resources Company (NYSE:PXD) is well-known among investors for its ability to develop and grow its oil and gas business by utilizing cutting-edge technologies such as predictive analytics and machine learning to improve drilling and completion efficiency. As of the second week of February, the stock gained 72% in the past twelve months.
In addition, Pioneer Natural Resources Company (NYSE:PXD) attracts income investors due to its 17-year streak of dividend payouts to shareholders and four-year streak of dividend growth. The company pays an annual dividend of $2.30 per share, with a dividend yield of 1%, as of February 15.
Hedge funds are extremely bullish on Pioneer Natural Resources Company (NYSE:PXD), as they are on Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP). Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Adage Capital Management is a leading shareholder in Pioneer Natural Resources Company (NYSE:PXD), with 1.63 million shares worth more than $298 million.
Here is what ClearBridge Investments Dividend Strategy has to say about Pioneer Natural Resources Company (NYSE:PXD) in its Q3 2021 investor letter:
“Over the last year, we have also added a position in Pioneer Natural Resources, a best-in-class producer in the Permian Basin. We added Pioneer as we anticipated rising commodity prices and sought more direct leverage to that trend. Our overweight to energy has benefited our performance this year, in particular through the first half of the year, and we believe the sector, still less than 3% of the S&P 500, remains underinvested and attractive going forward.”
7. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 45
Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and gas firm with about 414,000 net acres of reserves in the Permian Basin. In the third quarter of 2021, the Texas-based company’s Permian Basin oil production totaled 223.0 Mbo/d.
Diamondback Energy, Inc. (NASDAQ:FANG), like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), is one of the most closely followed oil and gas stocks by analysts and investors. In January, Jeanine Wai of Barclays kept an Equal Weight rating on Diamondback Energy, Inc. (NASDAQ:FANG) ahead of the company’s Q4 results. Wai anticipates that the independent oil company’s “strong” operational momentum will persist. The analyst raised her price target for the stock to $127 from $111.
Meanwhile, 45 hedge funds held long positions in Diamondback Energy, Inc. (NASDAQ:FANG) at the end of 2021, totaling $572 million. Harris Associates is the largest shareholder of the company with a total stake worth $328 million as of Q4 2021.
In its Q4 2021 investor letter, Miller Value Partners mentioned Diamondback Energy, Inc. (NASDAQ:FANG) and discussed its stance on the firm. Here is what the fund said:
“Diamondback Energy (FANG) returned 14.4% in the quarter as the oil price rose and fell during the quarter ending the period largely in the same place that it started. The company reported strong 3Q results beating on the top and bottom line. The company reported revenue of $1.9B beating consensuses of $1.5B with EPS of $2.94 beating expectations for $2.79. The beat was driven by a combination of higher volumes, higher realizations, and efficiency gains. The company increased its total production guidance for the year to 370-372mboe/d1 (up from 363-370mboe/d) while lowering Capital Expenditure (CAPEX) guidance for the second time this year to $1.49-1.53B. The company raised the dividend for the third time this year to $2/share annually while authorizing a new $2B share repurchase program. Starting in 4Q21, the company plans to return 50% of Free Cash Flow to shareholders through the base dividend and a combination of buybacks and special dividends. Finally, the CEO Travis Stice announced plans to reduce methane emissions by 70% as part of the firm’s ESG initiative.”
6. EOG Resources, Inc. (NYSE:EOG)
Number of Hedge Fund Holders: 51
With operations in the US, China, and Trinidad & Tobago, EOG Resources, Inc. (NYSE: EOG) is one of the leading American crude oil and natural gas exploration and production companies. EOG Resources, Inc. (NYSE: EOG) had total crude oil production of 449,500 Bopd as of November 2021, exceeding the high end of the guidance range with improved well productivity.
The crude oil and natural gas producer reported its third-quarter earnings in November, with total revenue of $4.77 billion, up 112% from the previous year. EOG Resources, Inc. (NYSE: EOG) shareholders were also ecstatic as the company increased its quarterly dividend by 82% in Q3 2021. The company now pays an annual dividend of $3 per share, for a dividend yield of 2.57%.
Truist analyst Neal Dingmann is bullish on the continued operating efficiencies and sustained cost reductions of EOG Resources, Inc. (NYSE: EOG), upgrading the oil stock to a Buy from a Hold rating. According to Dingmann, the Houston-based oil and gas company’s financial strength should outperform current consensus projections for FY22/FY23. At the end of January, the Truist analyst increased his price target for EOG Resources, Inc. (NYSE: EOG) to $135 from $111.
EOG Resources, Inc. (NYSE: EOG) gained more traction from hedge funds in Q4 2021 as the oil and gas E&P company continues to grow its financial health with strategic plans through 2022. At the end of December 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $1.16 billion in EOG Resources, Inc. (NYSE: EOG), up from 47 in the preceding quarter worth $1.02 billion.
In its Q3 2021 investor letter, Madison Funds mentioned EOG Resources, Inc. (NYSE: EOG) and discussed its stance on the firm. Here is what the fund said:
“EOG is a leading oil and gas exploration and production company with attractive exposure to U.S. shale resources. Its energy mix is ~72% oil and liquid natural gas and 28% natural gas. The company has premium acreage that includes over 10,000 potential drilling locations, which provides a long runway for growth. EOG has a disciplined management team that limits operating expenses and capital spending, which results in high free cash flow, a rarity in the Energy sector….”
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Disclosure. None. Top 10 Oil and Gas Stocks To Invest In is originally published on Insider Monkey.
