The global economy depends heavily on oil companies. They provide fuel and electricity. Moreover, they provide the raw materials for plastics, rubber, and fertilizer production.
This guide will help you discover the 10 best oil stocks to add to your portfolio right now and learn how to complete your investment at a commission-free broker.
In This Guide
These 10 companies are considered the best oil stocks to buy right now.
Using our recommended stockbroker, eToro, you can invest in these top oil stocks with 0% commission.
Even though the value of oil has increased ten-fold since the pandemic began, that doesn’t mean all companies in this sector should be considered for your portfolio.
To ensure that you are making smart investments, it is essential to research the best oil stocks for 2022. Here are ten oil companies analyzed to get you going in the right direction.
In the global E&P industry, ConocoPhillips ranks among the largest firms. Over a dozen countries operate under the company’s business model, which focuses on finding and producing oil and natural gas.
Besides being a large company, ConocoPhillips has access to some of the world’s cheapest oil, including the Permian Basin. In 2021, it strengthened its position in that low-cost, oil-rich region by acquiring Concho Resources and Shell’s assets there. Moreover, because of its average cost per barrel at $40 and many of its resources are even cheaper, it can be profitable in almost any oil market environment, generating a large amount of cash flow for the company.
ConocoPhillips plans to return a significant portion of its free cash flow to investors as the future of oil demand remains uncertain. Accordingly, the company plans to pay a steady dividend, buy back shares, and variably return excess cash.
Finally, the company’s top-tier balance sheet complements its low-cost portfolio. ConocoPhillips has one of the highest credit ratings among E&P companies and a low leverage ratio. That makes it a safe investment.
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Devon Energy is an E&P company focused on the US. However, it has diversified its operations across several low-cost, oil-rich basins. Diversification allows the company to produce a lot of low-cost oil and natural gas, generating cash.
In 2021, the company introduced an industry-first fixed-plus-variable dividend framework. As much as 50% of its excess cash flow is distributed as variable dividend payments each quarter after funding its fixed base dividend and capital expenditures. To strengthen its balance sheet, Devon repurchases shares with the remainder of its excess cash.
Devon’s dividend strategy makes it an attractive option for income-oriented investors. The dividends they receive are sustainable throughout the oil price cycle, and they may be able to earn significant payouts during times of high oil prices.
Enbridge operates one of the world’s largest oil pipeline systems. Approximately 30% of North American Oil is transported through its pipelines. Additionally, Enbridge operates a natural gas pipeline network, a natural gas utility business, and a renewable energy business.
Enbridge’s pipeline operations generate stable cash flow with long-term contracts and government-regulated rates. As a result, it can pay a high-yield dividend while expanding its energy infrastructure operations.
Enbridge has invested significantly in infrastructure geared toward cleaner energy in recent years. These include natural gas pipelines, offshore wind energy in Europe, and hydrogen energy. While Enbridge remains vital to supporting the oil market’s current needs, these investments position it for the future of energy.
ExxonMobil is a fully integrated supermajor that ranks among the largest oil companies in the world. Aside from exploration and production, the company also engages in midstream, petrochemical manufacturing, refining, and marketing petroleum products.
Most of ExxonMobil’s recent efforts have been focused on reducing business costs and improving efficiency. In 2022, these investments will begin to pay off. Over the past few years, the company has significantly reduced its oil production costs by focusing on its highest-return assets and leveraging its massive scale. Consequently, the company can generate a lot of cash when oil prices are high.
As a result, ExxonMobil’s dividend and status as a Dividend Aristocrat should remain intact. In addition, due to the growth of renewable energy, many investors are avoiding oil stocks entirely. Nevertheless, ExxonMobil invests in lower-carbon fuels such as carbon capture and storage and biofuels. Thus, it should continue to fuel the economy for many years.
The next stock on the list is the leading oil-and-gas pipeline company, Kinder Morgan. Four main segments comprise the company: pipelines for natural gas, products pipelines, terminals, and carbon dioxide.
The adjusted earnings for Q4 were $609 million. They were $604 million a year ago. Wall Street, however, was not as enthusiastic about the CO2 segment’s results.
KMI stock is currently around $19, up 18% year to date. At the time of writing, it is trading at 15 times forward earnings. On the other hand, the 12-month median price forecast is $19.
Phillips 66 is a leading oil refining company operating in the US and Europe. CPChem, a joint venture with Chevron (NYSE: CVX), invests in midstream and petrochemical operations. In addition, its marketing and specialties division distributes refined products and manufactures specialty products such as lubricants.
Phillips 66 is one of the lowest-cost refiners in the industry due to its large-scale, vertically integrated operations. This is due to its integrated midstream network obtaining low-cost crude for refining and petrochemical feedstocks and investing in projects that give the company higher margins on its products.
Phillips 66 has a strong financial profile with an investment-grade balance sheet and manageable debt. Additionally, the company has a significant cash reserve. With low debt and high cash reserves, it has plenty of capital for expansion projects, including renewable fuels.
For the past decade, the company has been a dividend growth dynamo and a share buyback dynamo. Phillips 66’s focus on making smart investments and returning cash to investors should allow it to continue enhancing shareholder value in the years to come.
Chevron is one of the largest US oil companies active in more than 180 countries. According to Leggate, Chevron is an excellent defensive investment on rising crude prices, and defensive investing has worked well in the past during oil price shocks. In addition, Chevron’s cash flow provides opportunities for aggressive share repurchases.
Also, Chevron pays a dividend of 3.4%, and its stock price is more closely tied to WTI crude oil than Exxon Mobil Corp. (XOM). Chevron’s stock price correlates 41.4% to crude oil prices. On March 25, CVX stock closed at $169.31, and Bank of America gave it a “buy” rating and a $205 price target.
The next independent E&P company with global operations is Occidental. Occidental completed the acquisition of Anadarko Petroleum in August 2019 for $55 billion. Analysts have speculated when the acquisition might start creating value for shareholders.
Oxy shares are currently trading around $55, up more than 85% since January. It currently pays a dividend of 1%. Its forward P/E ratio is 14. Currently, the 12-month median price forecast for OXY stock is $47.
If you are searching for undervalued oil stocks, Shell could be one of your best choices. The P/E ratio of this oil and gas giant, based on current prices, is just over 10 times. Due to this, it is likely to be undervalued – especially when compared with the market average.
Shell is even more attractive when considering its current dividend yield of over 3%. Over the past year, Shell’s oil stock gained more than 47%. Shell stocks have dropped by a little under 2% over the past five years.
This top-rated oil company is listed on the London Stock Exchange so that you can gain exposure to the shares. Even if you are based in the US, you can still invest in stocks like this one at eToro with a 0% commission.
Schlumberger is a leading oilfield services provider based in Houston, Texas. In recent months, the company has been in the spotlight due to rising oil demand. Q4 revenue grew 13% year-over-year to $6.2 billion, according to the company’s financial metrics.
Recent price gains for SLB stock have reached multi-year highs. The stock is currently over $44. Shares trade at 21 times expected earnings. The energy stock has a 12-month median price forecast of $44.50.
Having analyzed the top 10 oil stocks, let’s figure out how long it takes to find the right investment for your portfolio.
When looking for the best oil stocks in 2022, the first thing is how the company has performed against the broader market.
You can do this in several ways. First, however, the SPDR S&P Oil & Gas ETF is a great reference point, discussed previously. The SPDR S&P Oil & Gas ETF tracks an array of leading oil and gas companies.
Similarly, the SPDR S&P Oil & Gas ETF has gained 70% over the past year. The company has outperformed the ETF with gains of 92% over the same period, which makes it one of the best oil stocks to buy.
As well as Halliburton, whose stock price has increased by more than 80% in the past year. Meanwhile, other oil stocks discussed today have underperformed the broader market. So when you conduct a risk assessment of your chosen oil stocks, you should bear this in mind.
Operating costs are high for oil exploration, production, and transportation companies. Therefore, it will have a huge impact on the oil stock’s profit potential.
Companies with high operating costs will likely be the most affected if and when the oil price drops again and, more importantly, when OPEC confirms they are willing to raise production levels.
If you are looking for the best oil stocks for your portfolio, you should also consider whether or not the company is interested in diversifying into renewable energy.
By 2030, many governments have committed to banning conventional petrol and diesel cars. As a result, established oil companies will need to act quickly to gain a head start in the renewables market.
The oil industry pays some of the best dividends in the stock market. All companies on our list of the best oil stocks have a solid dividend program, except for Antero Resources.
Therefore, oil companies’ investments can generate capital gains and a consistent income stream.
Take a look at how your chosen oil stock has recovered from the large capitulation that most companies in this sector had to endure during the pandemic.
Most of the best oil stocks we have analyzed on this page have not only recovered their share price losses related to COVID but have since achieved new heights.
Despite this, some companies – like BP – still enjoy lower share prices than pre-pandemic levels.
Yes, oil stocks make good long-term investments and should probably be part of a diversified portfolio. In the form of dividends, oil shares can provide a passive income in addition to capital appreciation.
The industry, however, is volatile in the short term. Oil is a fossil fuel, just like natural gas and coal. Supply and demand determine oil prices and share prices. Thus, investors should watch numerous headlines in the oil industry, including macroeconomic developments, geopolitical tensions, and climate change.
Therefore, before investing in oil stocks, market participants need to understand the risk/return profile of the stocks. In addition, retail investors tend to be unnerved by short-term price swings. Therefore, constructing a long-term portfolio requires further due diligence and an individual approach.
According to the SEC, Penny stocks are publicly-traded companies with a share price below $5. The upside potential of oil penny stocks is huge, but they also carry many risks. Despite this, if you’re looking for an oil penny stock to buy right now, consider these companies:
Athabasca Oil Corp is an energy company that specializes in exploring, developing, and producing light oil and liquid-rich natural gas. Company operations are divided into Light Oil and Thermal Oil segments. Thermal oil generates the greatest amount of revenue. Thermal Oil consists of developing, exploring, and producing bitumen out of sand and carbonate rock formations in the Athabasca region of Northern Alberta.
Transportadora is a market leader in natural gas liquid distribution. With a total length of 9,231 km, it operates the longest pipeline system in Latin America. More than 6 million customers receive natural gas services through Transportadora’s distribution channels and partner companies.
Transportadora has a market cap of $871 million and an EPS of $1.07. Its 52-week low is $3.72, and its 52-week high is $7.69.
Further, Transportadora trades over 18,010 shares per day, and its revenue in 2019 was $48 billion.
Clean Energy Fuels is a major supplier and producer of natural gas. The company operates over 530 fueling stations in 43 states and Canada. Additionally, Clean Energy Fuels offers Redeem, a renewable natural gas derived from organic waste for commercial vehicles. Compared to gasoline and diesel, Redeem is 70% cleaner, making it a good option for heavy-duty fleets and trucks.
Its market capitalization is $529 million, and its EPS is $0.16. It trades more than 673,000 shares a day. In 2019, Clean Energy Fuels generated revenue of $344 million.
Tamarack Valley Energy Ltd is a company that specializes in the exploration, development, and production of oil and natural gas. The company aims to drill and acquire repeatable and predictable long-life resource plays in the Western Canadian Sedimentary Basin. Viking Oil, Cardium Oil, and Penny Barons Oil are some of their oil and gas properties.
Baytex Energy Corp is a gas and oil company. It operates in Canada and the United States. Most of its revenue is generated in Canada. As part of its Canada segment, the company explores, develops, and produces crude oil and natural gas in Western Canada.
It would be best if you had a strong grasp of which oil stocks are suitable for your investment portfolio and your long-term investing goals. Next, you should determine where you intend to buy oil stocks.
Ensure that you select a trading platform that will allow you to access the oil stocks you wish to add to your portfolio at a competitive price. It is a plus if the platform allows you to buy fractional shares.
According to our analysis, eToro is the best place to invest in oil stocks. Among the reasons are:
We pick eToro as the best online stock broker for retail investors. More than 3,000 stocks are available across more than a dozen exchanges and markets. These include all 10 oil stocks we examined today. One of the best parts of eToro is that it allows you to buy stocks for as little as $10. Consequently, you can gain exposure to the most expensive stocks by trading fractional shares.
Several markets are supported, including the US, UK, Hong Kong, Germany, etc. Whether you buy the US or foreign companies, eToro has 0% commissions on oil stocks. Furthermore, every oil stock listed on eToro can be purchased for just $10. That is because eToro favors fractional shares. So you only have to deposit $10 to find your oil stock investments. Additionally, US residents can deposit funds for free. Payments can be made with a debit or credit card through PayPal, Neteller, an ACH transfer, online banking, and other convenient methods.
It is also important to know that you will receive your dividends directly in your eToro account when you invest in oil stocks that pay dividends. Dividends can then be reinvested back into the oil industry or withdrawn. eToro also supports hundreds of commission-free ETFs for portfolio diversification.
The United States Oil Fund and SPDR S&P Oil & Gas Exploration and Production ETF are included. Additionally, you can copy the positions of other investors on eToro using the copy trading feature. To invest passively, you only have to select a verified trader whose goals align with your own.
Additionally, eToro offers professionally managed portfolios. Smart portfolios enable you to gain passive exposure to several industries, such as oil. Furthermore, eToro is one of the best places to buy Bitcoin and dozens of other digital currencies, thanks to its popular crypto exchange.
67% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
The price of commodities is booming in the global market, so now might be a good time to invest in the best oil stocks. In addition, the oil sector is not only doing well – but companies operating in this space typically have a strong dividend program.
To buy oil stocks for 0% commissions and with a minimum investment of just $10 per trade – open an account with eToro and deposit funds fee-free in less than five minutes.
With oil prices over $100 a barrel for some time now, several companies operating in this field are attractive investments. Nevertheless, not all oil stocks are good investments - so do your research.
Currently, ConocoPhillips is the best oil stock to buy. However, investing in China Petroleum may also be a good choice if you seek high dividends. Additionally, Antero Resources is one of the best oil stock picks for momentum investors.
Yes, as long as you have an account with a broker who offers access to your chosen oil stock, you can easily invest from the comfort of your own home. In addition, nearly all oil stocks are listed on the New York Stock Exchange (NYSE).
The commodity oil is more suitable for short-term traders since this asset class is extremely volatile. Moreover, oil typically moves in bullish and bearish cycles - so long-term value investors would not be interested in this asset.
All 10 companies from our list of the best oil stocks can be bought and sold at eToro for just $10. In addition, this top-rated broker allows you to buy oil stocks from both the US and foreign markets on a 0% commission basis.
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