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 Organization of the Petroleum Exporting Countries (OPEC) at the start of April announced a surprise cut in oil production.
"OPEC and its partners moved on the weekend to accelerate production cuts to stem falling crude oil prices," says Peter McNally, global sector lead for Industrials Materials and Energy at Third Bridge. "The reported 1 million barrel per day (bpd) curtailment is impactful and timed for maximum effect."
Still, recession risks linger, which could slow global oil demand. Additionally, 2023 will continue to be a more difficult year for oil-weighted names," says BofA Securities analyst Doug Leggate, due in part to "a rangebound but volatile oil outlook," as well as "headwinds from inflation and cash tax."
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 (opens in new tab). Each of the names featured here boasts either a Strong Buy or Moderate Buy rating from Wall Street analysts, and each offers major upside potential based on their consensus price targets.
Data is as of March 31.
Schlumberger
- Market value: $70.1 billion
- TipRanks consensus price target: $66.55 (35.5% upside potential)
- TipRanks consensus rating: Strong Buy
Schlumberger (SLB (opens in new tab), $49.10) 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 more than 16% over the past year, driven by higher oil prices and solid quarterly results.
The company reported Q4 revenues of $7.9 billion, up 27% year-over-year, driven by a jump in its international revenues, which grew 26%. Diluted earnings came in at 74 cents per share, an increase of 76% 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.
"Overall, 2022 was transformative for SLB as we set new safety, operational, and performance benchmarks for our customers and strengthened our market position both internationally and in North America," said Schlumberger CEO Olivier Le Peuch. The executive expects the strength to continue going forward.
"Activity growth is expected to be broad-based, marked by an acceleration in international basins. These positive activity dynamics will be amplified by higher service pricing and tighter service sector capacity," Le Peuch said. Additionally, the reopening of China "could support further upside potential over 2023."
Wells Fargo's top-rated analyst, Roger Read, is upbeat about SLB with a Buy rating. He also has a price target of $69 on the stock, representing implied upside of 40.5% from current levels.
"Increased activity in the offshore and international markets presents upside for strong international servicers in our view, which is why SLB remains our top pick in the sector," said Read in a note to clients.
The Street is also bullish on one of the best energy stocks to buy, with a 11 Buys and one Hold among analysts that have sounded off over the past three months. TipRanks offers up a full analyst rundown of SLB shares (opens in new tab).
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Phillips 66
- Market value: $47.0 billion
- TipRanks consensus price target: $129.00 (25.3% upside potential)
- TipRanks consensus rating: Moderate Buy
Phillips 66 (PSX (opens in new tab), $102.99) 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 16% in the past year, fueled by higher prices for commodities and strong quarterly results.
PSX posted revenues of $40.3 billion in Q4, a jump of 23.6% year-over-year. Adjusted earnings came in at $4.00 per share, up 36% over the year prior.
More encouragingly, the company outlined plans in late 2022 to increase shareholder distributions to a range of $10 billion to $12 billion by the end of 2024 through stock buybacks and dividends. In addition, PSX's board of directors approved a $5 billion increase to the company's share repurchase program, which brings the total amount of stock buybacks authorized by the board since 2012 to $20 billion.
Phillips 66 also intends to ramp up its adjusted EBITDA through its interest in DCP Midstream (opens in new tab), which is engaged in the business of gathering, processing, transporting, storing and marketing natural gas. In January, Phillips increased its economic interest in this venture to 86.8%. DCP Midstream is a master limited partnership between PSX and Enbridge.
Top-rated Jefferies analyst Lloyd Byrneis is sidelined on the stock with a Hold rating, but a $120 price target. The analyst expects that PSX is likely to generate free cash flows of approximately $16 billion from 2023 to 2025 and return around $10.5 billion to stockholders in the same period.
Most Wall Street analysts are cautiously optimistic about the energy stock with a consensu rating of Moderate Buy based on six Buys and four Holds. See the full rundown of analyst ratings for PSX on TipRanks (opens in new tab).
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Pioneer Natural Resources
- Market value: $48.0 billion
- TipRanks consensus price target: $252.41 (23.6% upside potential)
- TipRanks consensus rating: Moderate Buy
Pioneer Natural Resources (PXD (opens in new tab), $204.24) 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 Q4, PXD reported revenues of $5.1 billion, up 18.6% year-over-year. The company generated strong free cash flows of $1.7 billion in the fourth quarter, while adjusted income came in at $5.98 per share, double what it reported in the year-ago period
The oil giant bought $400 million worth of shares during the fourth quarter, and declared a quarterly base-plus-variable dividend of $5.58 per share. This includes a $1.10 base dividend and a $4.48 variable dividend. This dividend indicates a total annualized dividend yield (opens in new tab) of approximately 11% for PXD.
For fiscal 2023, Pioneer Natural Resources expects its capital expenditures to range between $4.45 billion and $4.75 billion and anticipates this to be fully funded by its fiscal cash flows of roughly $9 billion.
The company has forecasted full-year oil production to range from 357 to 372 thousand barrels of oil per day (MBOPD) and total production of 670 to 700 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 10 Buys, seven Holds and two Sells. Check out Wall Street's average, highest and lowest price targets for PXD on TipRanks. (opens in new tab)
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EOG Resources
- Market value: $67.4 billion
- TipRanks consensus price target: $149.39 (30.3% upside potential)
- TipRanks consensus rating: Strong Buy
EOG Resources (EOG (opens in new tab), $114.63) 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 $6.7 billion in Q4, a jump of 11.7% year-over-year. Adjusted earnings came in at $3.30 per share versus $3.09 in the same period a year ago.
The company continued to generate strong free cash flows of $1.7 billion in Q4. In addition, EOG declared a quarterly dividend of 82.5 cents per share, along with a special dividend of $1.00 per share.
Top-rated analyst Gabriele Sorbara from Siebert Williams Shank is upbeat toward EOG, with a Buy rating and $172.00 price target.
The analyst believes that EOG "has a long track record of exceeding its guidance on both production and capex."
Indeed, even in Q4, EOG's production of oil, natural gas and natural gas liquids was well above its midpoint guidance. Additionally, capital expenditures of $1.36 billion was within 1% of 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 15 Buys and just three Holds among analysts who have released notes over the past three months. Check out other analysts' price targets and analysis for EOG at TipRanks. (opens in new tab)
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ConocoPhillips
- Market value: $130.6 billion
- TipRanks consensus price target: $136.31 (37.4% upside potential)
- TipRanks consensus rating: Strong Buy
ConocoPhillips (COP (opens in new tab), $99.21) 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.
The oil giant reported solid Q4 results, with revenues of $19.3 billion, up 20.7% year-over-year. ConocoPhillips posted adjusted earnings of $2.71 per share, compared to its earnings of $2.27 in the same period last year.
"We returned $15 billion of capital to shareholders and achieved record production in our Lower 48 assets, while adding new high-quality strategic projects to enhance our global portfolio for decades to come," said Ryan Lance, CEO of ConocoPhillips, in the company's press release.
The Lower 48 is COP's largest business segment based on oil production, with 10.8 million net acres.
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 1.7 6million barrels of oil equivalent a day at the midpoint. The company's full-year capex guidance is between $10.7 billion and $11.3 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 (opens in new tab).
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Valero Energy
- Market value: $51.8 billion
- TipRanks consensus price target: $162.47 (16.4% upside potential)
- TipRanks consensus rating: Strong Buy
Valero Energy (VLO (opens in new tab), $139.60) 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 revenues of $41.7 billion in Q4, up 16.2% year-over-year. Adjusted earnings came in at $8.45 per share, well above earnings of $2.47 from the year-ago period and handily beating analysts' estimates of $7.32 (opens in new tab).
"Our refineries operated at a 97 percent capacity utilization rate in the fourth quarter, which is the highest utilization rate for our system since 2018," said Joe Gorder, Valero's chairman and CEO.
Valero is also aggressively reducing its debt, slashing it by $442 million in the fourth quarter. Since the second half of 2021, the company has reduced debt on its balance sheet by around $4.0 billion.
At the end of Q4, the oil refinery had a total debt of $9.2 billion and cash and cash equivalents of $4.9 billion, with a debt to capitalization ratio, net of cash and cash equivalents of approximately 21%. In contrast, the company had a debt-to-capitalization ratio of 40% as of March 31, 2021.
Top-rated analyst Ryan Todd from Piper Sandler has a Buy rating and $173 price target on VLO, which implies upside potential of 23.9% to current levels. This is even after one of the Street's best energy stocks has seen a strong rally of nearly 37% over the past year.
The Street is upbeat here, with 14 Buys 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 (opens in new tab).
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Cheniere Energy
- Market value: $38.4 billion
- TipRanks consensus price target: $197.94 (25.6% upside potential)
- TipRanks consensus rating: Strong Buy
Cheniere Energy (LNG (opens in new tab), $157.60) 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. In Q4 2022, the company's revenues were up 39% year-over-year to $9.1 billion. LNG has benefitted from the rising price of natural gas globally, along with increasing exports to Europe in recent weeks. The total volume of gas exported in the fourth quarter was 600 trillion Btu, up from 540 trillion in the same period last year.
What's more, the company swung to a net profit of $3.9 billion compared to a net loss of $1.3 billion in the year-ago period.
For fiscal 2023, LNG is guiding for adjusted EBITDA in the range of $8.0 billion to $8.5 billion, while it expects distributable cash flows between $5.5 billion and $6.06 billion.
"Our stable operations continue to underpin our strong financial results, which have enabled Cheniere to execute on our comprehensive capital allocation plan, highlighted by the achievement of investment grade ratings, returning meaningful capital to our stakeholders via debt repayment, share repurchases and dividends, and pursuing further accretive growth at Sabine Pass and Corpus Christi - all of which serves to enhance the long-term value of Cheniere," said Jack Fusco, CEO of Cheniere, in the company's press release.
Jeffries analyst Lloyd Byrne has a Buy rating and a $210 price target on LNG stock. Byrne likes Cheniere "because its first mover advantages gives it a leg up in contracting and self-funding growth projects, which should help sustain its position as the largest U.S. liquefaction player generating strong returns on capital and consistent cash flows."
LNG is another one of Wall Street's favorite energy stocks, as evidenced by the consensus Strong Buy rating and $197 price target. This average price target indicates that even after being up more than 10% in the past year, Wall Street pros see additional upside of roughly 25% for the shares. See the full rundown of analyst ratings for LNG on TipRanks (opens in new tab).
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