The best energy stocks had an impressive run in 2022. The energy sector finished the year up nearly 60% – easily outperforming the broader equities market.
While the momentum stalled a bit to start 2023, things are looking up for energy stocks and energy ETFs – especially after the Saudi Arabia and Russia said they will extend production cuts for the next several months.
This extension is "longer than we had previously expected," says CFRA Research analyst Stewart Glickman. "In addition, the CME Group's Fed Watch tool indicates that a majority of survey respondents see no Fed Funds rate hike at any of the last three Fed meetings for 2023. While we still think year-over-year crude prices will drop in 2023, we think even an average price in the low-$80 per barrel range for the year would still deliver robust earnings power and free cash flows to E&Ps."
Still, recession risks linger, which could slow global oil demand, particularly in China. However, Glickman says "the extended cuts likely go a long way to cushioning the blow from prolonged weakness in Asia-Pacific demand."
As such, investors would be wise to keep a close eye on energy stocks moving forward. But not all are created equal.
Read on as we look at seven of the best energy stocks to buy now. To compile the list, we turned to the TipRanks database. Each of the names featured here boasts either a Strong Buy or Moderate Buy rating from Wall Street analysts, and each offers notable upside potential based on their consensus price targets.
Data is as of Sept. 5.
Schlumberger
- Market value: $85.6 billion
- TipRanks consensus price target: $66.08 (9.7% upside potential)
- TipRanks consensus rating: Strong Buy
Schlumberger (SLB, $60.21) is an oil exploration and production (E&P) company headquartered in Houston, Texas. The firm recently rebranded itself as SLB with a focus on decarbonization.
Shares of SLB are up nearly 60% over the past year, driven by higher oil prices and solid quarterly results.
The company reported Q2 revenues of $8.1 billion, up 20% year-over-year, driven by a jump in its international revenues, which grew 21%. Diluted earnings came in at 72 cents per share, an increase of 44% year-over-year.
Moreover, SLB's board of directors approved a 43% increase to its quarterly cash dividend, now paying out 25 cents per share.
"As the upcycle continues to unfold, we are excited about the opportunities for our business, with international- and offshore-led growth fueling strong pretax segment operating margin expansion and cash flows as highlighted in this quarter's results," said Schlumberger CEO Olivier Le Peuch. The executive expects the strength to continue going forward.
Jefferies analyst Lloyd Byrne is upbeat about SLB with a Buy rating. He also has a price target of $70 on the stock, representing implied upside of 16.3% from current levels.
"International and offshore activity expected to remain robust for the second half and going into 2024 (led by the Middle East and Latin America), which should continue to support top-line growth for the large cap oilfield service companies," Byrne wrote in a note to clients. And SLB, which is one of the analyst's top picks, reported higher-than-expected free cash flow in the second quarter.
The Street is also bullish on one of the best energy stocks to buy, with a 12 Buys among analysts that have sounded off over the past three months. TipRanks offers up a full analyst rundown of SLB shares.
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Phillips 66
- Market value: $52.0 billion
- TipRanks consensus price target: $129.42 (11.8% upside potential)
- TipRanks consensus rating: Moderate Buy
Phillips 66 (PSX, $115.76) is a diversified energy company that processes and markets fuels worldwide. While the Houston, Texas-based firm's fuel products primarily come from petroleum refining, it is also active in the natural gas trade and supplies chemicals and specialty products to global markets.
Shares of PSX have shot up by nearly 31% in the past year, fueled by higher prices for commodities and strong quarterly results.
Coming off a hot 2022 which creates tough year-over-year comparisons, PSX posted Q2 2023 revenue and earnings that were much lower than the year prior.
Still, the company "returned $1.8 billion to shareholders, progressed our business transformation cost reduction initiatives and increased expected synergy capture to more than $400 million in our Midstream business," said Mark Lashier, president and CEO of Phillips 6, in the press release.
Going forward, Phillips 66 also intends to ramp up its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) through its acquisition of DCP Midstream, which is engaged in the business of gathering, processing, transporting, storing and marketing natural gas. In June, Phillips completed its purchase of DCP Midstream, which is a master limited partnership between PSX and Enbridge.
UBS Global Research analyst Manav Gupta expects synergies from the acquisition to drive higher midstream earnings in fiscal 2023. Gupta has a Buy rating and $132 price target on PSX.
Most Wall Street analysts are cautiously optimistic about the energy stock with a consensus rating of Moderate Buy based on eight Buys and four Holds. See the full rundown of analyst ratings for PSX on TipRanks.
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Pioneer Natural Resources
- Market value: $56.7 billion
- TipRanks consensus price target: $260.76 (7.3% upside potential)
- TipRanks consensus rating: Moderate Buy
Pioneer Natural Resources (PXD, $243.03) is an oil exploration and production company with its headquarters in Irving, Texas. The company's exploration projects include the Permian Basin, Eagle Ford Shale, Rockies and West Panhandle projects.
In Q2, PXD reported revenue of $4.6 billion, down 33.5% year-over-year. However, the company generated strong free cash flows of $1.7 billion in the six months ended June 30.
The oil giant bought $142 million worth of shares during the second quarter, and declared a quarterly base-plus-variable dividend of $1.84 per share. This includes a $1.25 base dividend and a 59 cents per share variable dividend. This dividend indicates a total annualized dividend yield of approximately 3.3% for PXD.
For fiscal 2023, Pioneer Natural Resources expects its capital expenditures to range between $4.375 billion and $4.575 billion and anticipates this to be fully funded by its fiscal cash flows.
The company has forecasted full-year oil production to range from 364 to 374 thousand barrels of oil per day (MBOPD) and total production of 697 to 717 thousand barrels of oil equivalent per day (MBOEPD).
The majority of Wall Street analysts are cautiously optimistic toward one of Wall Street's best energy stocks. PXD has a Moderate Buy consensus rating based on seven buys, nine Holds and two Sells. Check out Wall Street's average, highest and lowest price targets for PXD on TipRanks.
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EOG Resources
- Market value: $77.7 billion
- TipRanks consensus price target: $147.50 (10.6% upside potential)
- TipRanks consensus rating: Strong Buy
EOG Resources (EOG, $133.39) is an American company engaged in the exploration, development, production and marketing of crude oil, natural gas and natural gas liquids (NGLs). The firm has reserves in the U.S. and Trinidad, and as of Dec. 31, 2021, it had net proved reserves of 3.7 million barrels of oil equivalent (MMboe). These reserves were made up of 41% crude oil and condensate, 22% NGLs and 37% natural gas.
EOG posted revenues of $5.6 billion in Q2, a decline of 25% year-over-year. Adjusted earnings came in at $2.49 per share versus $2.74 in the same period a year ago.
The company continued to generate strong free cash flows of $1.0 billion in Q2. In addition, EOG declared a quarterly dividend of 82.5 cents per share, and bought back 2.8 million shares over the three-month period.
Top-rated analyst Gabriele Sorbara from Siebert Williams Shank is upbeat toward EOG, with a Buy rating and $166.00 price target.
The analyst believes that EOG "has a long track record of exceeding its guidance on both production and capex."
Indeed, even in Q2, EOG's production of oil, natural gas and natural gas liquids was well above its midpoint guidance. Additionally, capital expenditures of $1.5 billion was below the midpoint of its outlook.
Sorbara believes that EOG's "track record of execution and shareholder returns with its cash-rich balance sheet" provides "differentiation and optionality, in our view."
EOG is another of the Strong Buy-rated energy stocks featured here, thanks to 12 Buys and just four Holds among analysts who have released notes over the past three months. Check out other analysts' price targets and analysis for EOG at TipRanks.
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ConocoPhillips
- Market value: $147.1 billion
- TipRanks consensus price target: $135.07 (10.0% upside potential)
- TipRanks consensus rating: Strong Buy
ConocoPhillips (COP, $122.83) is an oil E&P company, with its headquarters in Houston, Texas. COP has operations in 13 countries and total assets worth $95 billion. In 2022, its production averaged 1,738 million barrels of oil equivalent on a daily basis.
In Q2, ConocoPhillips posted adjusted earnings of $1.84 per share, compared to its earnings of $3.91 in the same period last year, as the average price for a barrel of oil dropped to $54.50 from $88.57.
Still, the company returned $1.4 billion in cash to shareholders through dividends and stock buybacks.
In late 2022, the company upped its quarterly dividend by 11% to 51 cents per share and raised its existing share buyback authorization by $20 billion.
COP anticipates 2023 oil production to be 1.80 million barrels of oil equivalent a day at the midpoint. The company's full-year capex guidance is between $10.8 billion and $11.2 billion.
Neal Dingmann, Truist's top-rated analyst, is bullish on the stock, with a Buy rating and a price target of $151. "ConocoPhillips's growth for the foreseeable future is tied to unconventional, which comes primarily from the Permian, distantly followed by the Eagle Ford, and Montney," Dingmann writes in a note. "The company also has attractive assets in Alaska, which could add additional growth. We rate the shares Buy given the dividend we believe sustainable and strong FCF yield."
Of the 17 analysts who have sounded off on COP stock over the past three months, 13 say it's a Buy. TipRanks offers a full analyst rundown of COP shares.
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Valero Energy
- Market value: $47.0 billion
- TipRanks consensus price target: $150.45 (13.0% upside potential)
- TipRanks consensus rating: Moderate Buy
Valero Energy (VLO, $133.12) is an American oil refinery that manufactures and markets transportation fuels and other petrochemical products. The company's diversified refinery base is located throughout the U.S., Canada and the U.K.
The company posted revenue of $34.5 billion in Q2, down 33% year-over-year. Adjusted earnings came in at $5.40 per share vs $11.57 per share in Q2 2022.
"Our refineries ran well with throughput capacity utilization at 94 percent and our U.S. wholesale system set a sales record of over 1 million barrels per day in May and June," said Lane Riggs, Valero's chairman and CEO.
At the end of Q2, the oil refinery had a total debt of $9.0 billion and cash and cash equivalents of $5.1 billion, with a debt to capitalization ratio, net of cash and cash equivalents of approximately 18%. In contrast, the company had a debt-to-capitalization ratio of 40% as of March 31, 2021.
Top-rated analyst Lloyd Byrne has a Buy rating and $159 price target on VLO, which implies upside potential of 19.4% to current levels. This is even after one of the Street's best energy stocks has seen a strong rally of 17% over the past year.
The Street is upbeat here, with eight Buys, two Holds and just one Sell among analysts that have sounded off over the past three months. See what else the pros have to say about VLO on TipRanks.
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Cheniere Energy
- Market value: $40.0 billion
- TipRanks consensus price target: $203.76 (22.6% upside potential)
- TipRanks consensus rating: Strong Buy
Cheniere Energy (LNG, $166.18) is a producer and exporter of liquefied natural gas (LNG) in the U.S. The company has "one of the largest liquefaction platforms in the world, consisting of the Sabine Pass and Corpus Christi liquefaction facilities on the U.S. Gulf Coast," with a total production capacity of approximately 45 million tonnes per annum (mtpa) of LNG in operation.
Cheniere has exhibited steady gains in revenues since the third quarter of 2020. However, in Q2 2023, the company's revenue was down 49% year-over-year to $4.1 billion as natural gas prices declined.
However, the company said its net income surged 85% to $1.4 billion.
For fiscal 2023, LNG is guiding for adjusted EBITDA in the range of $8.3 billion to $8.8 billion, while it expects distributable cash flows between $5.8 billion and $6.3 billion.
"Throughout the quarter, we continued to deploy capital pursuant to our comprehensive capital allocation plan, increasing shareholder returns, strengthening our balance sheet and pursuing accretive growth," said Zach Davis, chief financial officer of Cheniere, in the company's earnings call.
Jeffries analyst Sam Burwell has a Buy rating and a $210 price target on LNG stock. Burwell likes Cheniere because its "long-term capital allocation plan remains unchanged and execution remains best-in-class."
LNG is another one of Wall Street's favorite energy stocks, as evidenced by the consensus Strong Buy rating and $203.76 price target. This average price target indicates that even after being up more than 8% for the year-to-date, Wall Street pros see additional upside of roughly 23% for the shares. See the full rundown of analyst ratings for LNG on TipRanks.
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