These Unloved Energy Stocks Are a Bargain
Cleaned-up balance sheets and generous dividends make these dirt-cheap energy shares worth a look.
Love — and energy — make the world go 'round. But investors have shown a cold, cold heart to the energy sector, particularly conventional oil and gas producers. They've suffered from a widespread belief that fossil-fuel energy is in long-term decline.
The near-term economic forecast hasn't helped the stocks, either. Many skeptics feel global growth in 2026 won't be enough to push the price of oil much above current levels of about $60 per barrel for West Texas Intermediate crude, which is down from highs near $80 in January 2025. And even if demand picks up, producers are standing ready to supply more oil and send the price back down.
That has made energy stocks especially cheap in a market gone gangbusters on enthusiasm for artificial intelligence (AI). "The energy sector has become very neglected by mutual funds," says Jill Carey Hall, the head of strategy for U.S. small- and mid-cap stocks at investment firm BofA Securities. "Certainly from a valuation perspective, it looks attractive" compared with its history, she says.
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The sector's bargain price tag — along with a desire to diversify portfolios overly concentrated in pricey AI-related fare — has now reached the point that investment strategists are increasingly bringing energy stocks into their warm embrace. And that suggests the stocks should probably make up a bigger share of your holdings.
Better days ahead for unloved energy stocks
"I think people are really missing the mark on how oil markets are improving in the medium term," says Tyler Rosenlicht, who supervises three energy-focused investment strategies at fund firm Cohen & Steers. He believes rising demand from energy-hungry industries will exceed oil supply as early as 2027, pushing prices higher. "The reality is, the world is short on energy," he says.
Cole Smead, the CEO of Smead Capital, says he can't see oil prices falling further, as some bears have forecast. "The world loves oil at these prices." Adjusted for inflation, $60-a-barrel oil "is obscenely cheap," says Smead.
That implies energy investors may find a floor at current levels, with the future looking up — even if some patience is required.
In the meantime, many companies have cleaned up their balance sheets, cut costs and focused on returning cash to investors. They're well positioned to withstand middling oil prices, and they're poised for big benefits if oil prices rise faster than expected.
Some corners of the energy market already sport a more bullish outlook. For instance, many U.S. energy companies are benefitting from the growth of liquefied natural gas, or LNG. U.S. companies produce natural gas at rock-bottom costs and transform it into a product that can be shipped to Asia or Europe. Closer to home, the builders of data centers that power AI are increasingly looking to natural gas as a source of power.
We found a handful of energy stocks that are bargains now and poised to prosper as the energy sector perks up. (Prices, yields and other data are as of November 30, unless otherwise stated.)
With revenue and a market value both around $9 billion, APA (APA) is a small company that acts like a big company — which may make it an appealing takeover target for an even bigger company. The shares currently trade at nine times estimated earnings for the next 12 months.
In the U.S., APA operates primarily in the Permian Basin of west Texas and New Mexico, an area responsible for nearly half of the country's oil production. APA, formerly known as Apache, also produces oil in Egypt, and it has offshore drilling projects off the coasts of Suriname and the U.K.
This collection of assets should catch the eye of major energy producers, says Smead, whose Smead Value Fund counts APA as one of its top 10 holdings.
He also suggests that APA's liabilities are an asset. The company's debt has an average interest rate of 5.5% and an average term of 13 years — attractive to a buyer looking to lower the cost of its debt and extend its maturity schedule, says Smead. "Can I go out and borrow billions of dollars over a 13-year duration at 5.5%? The answer is no, I can't."
Jay Peters, of Connecticut-based money manager NewEdge Wealth, holds APA for his clients and likes the stock, takeover or no takeover. "This is a company known for capital discipline, operational efficiency and really diversified production. Having that global footprint provides some insulation when you don't have a ton of certainty on prices here in the U.S."
The company's cost efficiencies and relatively low debt load position it well for when the energy cycle turns, Peters says. "You might have to be patient, but I think the upside is there for long-term investors."
In a relatively strong showing for an energy producer, APA stock has gained 8% in 2025 through November.
An AI tie-in
Instead of drilling for oil and gas, Baker Hughes (BKR) sells equipment to the companies that do drill. The firm is therefore known as an oilfield-services provider — but Baker now prefers to call itself an "energy technology" company thanks to its industrial and energy technology segment, which now accounts for close to half the firm's $28 billion in annual sales.
That emerging business serves LNG companies and the builders of data centers, and it's what prompts Stewart Glickman, director of equity research at CFRA, to rate the stock a Strong Buy.
"Baker can provide a lot of the tools" that make LNG processing and data centers viable, Glickman says. "That's a great place to be." He sees the stock trading at $61 in the next year, up 22% from its recent close.
The industrial and energy technology business is rescuing Baker Hughes from an otherwise troubling growth profile. In the quarter that ended September 30, revenue in the segment increased 15% from the previous year, compared with an 8% decline in Baker's oilfield-services business. The "growthier" division's backlog — orders from customers that the company hasn't yet fulfilled — reached $32.1 billion at the quarter's end. The segment is also more profitable than Baker's legacy business, Glickman says.
Analyst Marc Bianchi of investment firm TD Cowen says Baker's exposure to "diverse and growing end markets" should make the company's results less volatile than other oilfield-services companies. The shares trade at 20 times estimated earnings, according to S&P Global Market Intelligence, which is still below their historic average despite an AI-assisted gain of 22% in 2025 through November.
Diamondback Energy (FANG) is a case study in how an energy producer can thrive by focusing on one basin — in this case, the Permian.
The company has avoided costs associated with adapting to diverse geology, regulations and logistics, and it has lowered costs by simplifying its supply chain, says analyst Bob Brackett of investment firm Bernstein. That gives Diamondback the best well performance in the Permian's Midland Basin, with the most wells per section and the lowest per-well and corporate-breakeven costs.
Even though it sticks to just one area, the company has grown; it acquired Endeavor Energy in 2024 and Double Eagle in 2025. In 2012, the year Diamondback went public, it recorded just $75 million in revenue. In the 12 months that ended September 30, revenue topped $14.6 billion.
Acquiring land adjacent to parcels it already owns allows Diamondback to lower costs by using the same equipment and crews to drill just a little bit farther, says CFRA's Glickman. "Diamondback has routinely been able to squeeze costs out of its system year by year," he says, "so even though the oil-price forecast isn't super, Diamondback is continuing to make profit-margin improvements." Glickman has a Strong Buy rating on the stock, which trades at just 14 times estimated earnings. He sees the shares reaching $176 over the next 12 months, implying a gain of 15% from current levels and a change of course from Diamondback's 7% drop in 2025 through November.
Diamondback also intends to distribute 50% of its free cash flow (money left over after operating expenses and spending to maintain or upgrade property and equipment) to shareholders through a combination of stock buybacks, special dividends and a regular dividend payout that currently yields 2.6%.
After falling about 12% in 2025 through November, EOG Resources (EOG) trades at just 11 times earnings. It's far from damaged goods, however, with an impressive collection of assets, a disciplined history of growth and a commitment to send most of its cash flow back to shareholders.
"EOG really has almost no debt on its balance sheet — it's probably the premier balance sheet in the exploration and production space," says Peters of NewEdge Wealth, which owns the shares for the firm's clients. "That provides us a margin of safety in the event that we do see prices slide further."
EOG had more cash than debt for three years, until it closed an acquisition in August 2025; as of September 30, the company had $8.1 billion in debt, offset by $3.5 billion in cash. EOG could pay off those obligations with about 10 months' worth of profits.
Those earnings come from drilling projects across the U.S. The Houston-headquartered company operates close to home in Texas, Oklahoma and New Mexico; farther north in Colorado, Wyoming and North Dakota; and in the Appalachian Basin, which stretches through Ohio and Pennsylvania. As a bonus, it also has operations in Trinidad and Tobago. Oil accounts for the majority of EOG's production, but natural gas makes up about 30%.
Despite the geographic sprawl, EOG is a low-cost provider. Morningstar analysts Joshua Aguilar and Christian Fleming note that for the past decade, EOG has prioritized drilling wells that provide superior returns even at oil prices as low as $45 per barrel. EOG calls wells that can generate a 60% return at $45 oil "double premium" — and it says it has 10 years' worth of that inventory.
EOG says it plans to return most of its 2025 free cash flow to shareholders. The company combines an aggressive stock-buyback program that would take roughly 7% of its stock off the market with a dividend that yields 3.8%. EOG has also used special dividends in the past to return even more cash to shareholders in boom years, most recently 2022.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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