Black Gold: Navigating Through Volatility with Prime Oil Stocks

Amidst escalating geopolitical tensions and unrelenting inflation, oil stocks are garnering renewed attention. Recent fluctuations in crude oil prices, spurred by global events, underscore the sector’s susceptibility to external pressures but also highlight potential investment opportunities.

Stephen Ellis of Morningstar advises that the inherent volatility of the oil market can offer unique opportunities for patient investors. According to Ellis, moments when oil prices plummet or the market sentiment is bearish are often the best times to secure high-value investments at a lower cost. He notes that there are still “selective bargains” to be found, even as many oil stocks now approach all-time highs after rebounding from previous lows.

Meanwhile, the international scene remains tense, with conflicts such as the ongoing situation in Ukraine and past military actions in the Middle East affecting global oil supply chains. These conflicts can lead to sudden disruptions and swings in oil prices, impacting the profitability and stock values of companies in the energy sector.

This watchlist focuses on oil stocks that are poised to navigate these turbulent waters. Whether you’re an experienced energy sector investor or considering diversifying your portfolio, the current landscape offers both challenges and opportunities worth exploring.

Exxon Mobil (NYSE:XOM) – Positioned for Potential Upside

Exxon Mobil, an integrated behemoth in the oil and gas sector, has shown significant growth this year, with its stock price appreciating over 18% since January. The company’s operations span across various segments of the hydrocarbon value chain, including Upstream, Energy Products, Chemical Products, and Specialty Products, ensuring a diversified revenue stream.

While Exxon Mobil’s financial performance has been somewhat uneven, it still managed an average positive earnings surprise of 3.45% in fiscal 2023. Despite missing its bottom-line targets in the second and third quarters, the broader perspective suggests resilience. For the current fiscal year, analysts are setting their expectations for earnings at $9.33 per share on revenues of $335.45 billion, which slightly lags behind last year’s figures of $9.52 EPS and $344.58 billion in sales.

However, the more optimistic projections suggest a possible earnings rise to $11.08 per share with revenue potentially soaring to $384.24 billion. In light of the company’s strategic positioning and its ability to navigate market shifts, these high-side targets appear increasingly feasible. Consequently, Exxon Mobil stands out as a promising candidate for those considering investments in the oil sector, especially given the current market conditions.

ConocoPhillips (NYSE:COP) – A Solid Bet Amidst Market Fluctuations

Houston-based ConocoPhillips, a leader in the upstream segment of the oil industry, has shown a commendable performance this year, with its stock price increasing by 10% since January. The company, which has a broad international footprint, excels in the exploration and production of oil, bitumen, and natural gas, alongside its transportation and marketing operations.

Despite a hiccup in the second quarter when it missed its earnings per share (EPS) target, ConocoPhillips generally delivers strong financial results. Last year, it consistently surpassed earnings expectations, boasting an average positive earnings surprise of 7.28%. Looking ahead, analysts forecast a steady rise in earnings for the current fiscal year, projecting an EPS of $9.01 and revenue of $59.23 billion, slightly up from last year’s $8.77 EPS and $58.57 billion in sales.

The more bullish outlook among some experts suggests the potential for an EPS as high as $13.68 and revenues reaching $70.31 billion, contingent on global oil market dynamics and potential supply chain disruptions. Given these factors, ConocoPhillips represents a resilient investment opportunity, especially for those looking to capitalize on the current and projected volatility in the oil markets. This makes COP a compelling addition to consider.

Occidental Petroleum (NYSE:OXY) – Strong Performer with Growth Potential

Occidental Petroleum, another upstream-focused entity, has had a promising start to the year, with its stock appreciating over 12%. The company operates across the United States, the Middle East, and North Africa, focusing on the acquisition, exploration, and development of hydrocarbon properties. Alongside its core upstream business, Occidental also maintains midstream and marketing divisions, adding layers to its operational portfolio.

Financially, Occidental’s performance has been somewhat mixed, but the company’s high points in fiscal 2023 have notably outweighed the lows. It achieved an average earnings surprise of 6.75% during the year, showing resilience despite missing targets in the earlier quarters. By the third quarter, Occidental had bounced back, posting earnings of $1.18 per share against expectations of 84 cents, underscoring its capability to recover and excel.

Looking forward to fiscal 2024, analysts are setting their sights on earnings of $3.80 per share with revenues projected at $30.23 billion, marking a slight improvement from the previous year’s figures of $3.69 EPS and $28.92 billion in revenue. The more optimistic forecasts suggest earnings could climb to $5.39 per share on revenues of $31.9 billion. Given the current geopolitical landscape and Occidental’s strategic positioning within it, this bullish scenario appears increasingly plausible. This makes Occidental Petroleum a compelling pick for investors eyeing growth in the oil sector amidst ongoing global uncertainties.