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3 ‘Strong Buy’ Oil Stocks Likely to Shine in 2022
Stock Analysis & Ideas

3 ‘Strong Buy’ Oil Stocks Likely to Shine in 2022

The year 2021 may be remembered as a year of strong recovery for the oil market, with the S&P 500 Energy Sector Index rising 50.6% in the last year.

The upward trend is expected to continue in 2022, owing to global economic recovery and improved end-user fuel use. Furthermore, the recently presented $1 trillion massive infrastructure program might be a big driver for the U.S. market, favoring higher crude prices.

Though the Omicron variant had recently sparked worries of a slowdown in oil demand recovery, these anxieties are gradually dissipating, as the strain is predicted to be less dangerous than previously thought. Simultaneously, existing vaccinations may be successful in neutralizing it, which is a major plus.

To put it together, oil stocks appear to be well-positioned, with an improving macro background and strong fundamentals.

Given this backdrop, investing in these top oil stocks that have received a consensus Strong Buy rating from experts could be rewarding. In addition, TipRanks gives each of these stocks a “Perfect 10” stock analysis.

Chevron (CVX)

Chevron is one of the best-positioned global integrated oil companies for a long-term production ramp-up.

The company has one of the greatest project pipelines in the business, given its prime position in the lucrative Permian Basin. With its purchases in the Permian and Marcellus basins, the organization has positioned itself as the second-biggest oil corporation in the U.S.

Further, Chevron is regarded as one of the top dividend stocks because of its solid financial position and cash flow generation capabilities. The firm has sufficient liquidity to continue paying quarterly dividends to its stockholders, as it has done in the past. During the third quarter, the oil giant paid a $2.6 billion dividend and produced $6.7 billion in free cash flow.

Last month, the company unveiled its capital strategy through 2022. It forecasted $15 billion in capital and exploration expenditures, up 20% from 2021 levels. Also positive is Chevron’s announcement that it will expand its share repurchase forecast to $3-$5 billion per year.

Chevron’s growth prospects have also been praised by Wall Street analysts, who have given the company a Strong Buy rating based on 14 Buys and 3 Holds. The average Chevron stock prediction of $135.06 represents 11.2% increase in value from current levels.

EOG Resources, Inc. (EOG)

EOG Resources is a significant upstream energy company with activities in a number of lucrative areas like the Permian Basin, which is the most prolific oil resource in the United States. The company’s operations are spread across the United States, China, Canada, and Trinidad.

The firm has a strong growth potential, a large inventory of drilling prospects, strong returns, and a well-disciplined management team. It owns a lot of land in oil shale areas including the Permian, Bakken, and Eagle Ford. EOG Resources has extensive undrilled premium sites in Delaware.

On the financial front, EOG reported $2.16 in adjusted profits per share in the third quarter, increasing 402.3% from the year-ago quarter. Increased production volumes and higher commodity prices fueled the profitability.

EOG’s bottom line should continue to benefit from rising oil prices and higher production.

Coming to the company’s dividend history, it increased the regular dividend by 82% to $3.00 per share. A special dividend of $2 per share was also declared.

Wall Street analysts have given EOG Resources a Strong Buy consensus recommendation, with 19 recent ratings, including 16 Buys and 3 Holds. The company is now trading at $95.35, with an average EOG price target of $115.05 implying 20.7% gain from that point.

Pioneer Natural (PXD)

Another top pick on this list is Pioneer Natural Resources. The company is a major upstream energy company that specializes in the Permian Basin, Eagle Ford Shale, Rockies, and West Panhandle.

The business recently completed a $3.1 billion asset sale in the Delaware Basin, making it a pure-play operator in the lucrative Midland Basin.

In addition, Pioneer Natural is flush with cash. During the third quarter, it generated $1.1 billion in free cash flow. Also, the corporation boosted its quarterly dividend by 100% to $3.02 per share, which will be paid in the fourth quarter.

Furthermore, Pioneer Natural’s production prospects appear to be promising. Total production is expected to be in the range of 613-619 MBoe/d in 2021, up from 367.3 MBoe/d in 2020. Oil production is expected to range between 356-359 thousand barrels per day.

On TipRanks, Pioneer Natural has a Strong Buy consensus rating, based on 15 Buys and 5 Holds. As for price targets, the average PXD stock price prediction of $230.20 implies 20.4% upside potential from the current levels.

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Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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