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But in early 2021, a cold snap in Asia warned of what was to come as demand for gas started rising. A global gas-price crisis unfolded, with European consumers having to out-compete Asian buyers to attract LNG deliveries. UK spot prices reached a record £4.50 per therm just before Christmas, representing a ninefold increase on 12 months previously. UBS Global Research analyst Lloyd Byrne believes Chesapeake should be able to produce nearly $6 billion in free cash flows from 2022 to 2025. He also expects 60% of that to be returned to investors based on its new dividend model.
The result is that EOG is able to score millions of dollars more per well for not that much more in terms of costs. These double-premium wells can produce a 60% after-tax return rate at a breakeven cost of around $40 per barrel. In its third quarter, for instance, Exxon generated nearly $6.8 billion in profit, versus a $680 million loss in the year-ago quarter. Cash flows from operations were $12.1 billion, allowing Exxon to not only cover capital investments and its dividend, but reduce its debt. Indeed, results were so good that Exxon pledged to resume its stock-buyback program in 2022.
For PSX, this focus on chemicals production rather than just transportation fuels has paid benefits. This isn’t a big or well-known company, but Wall Street is starting to lean in its direction, with eight Buys and Strong Buys, seven Holds and no Sells. Over the past couple of years, Exxon has been cutting costs and selling assets in Asia, Europe and Africa, as well as in the Barnett Shale, allowing it to focus on its best-performing assets. Now, Exxon’s breakeven costs to cover capital expenditures and dividends over the next five years is a meager $35 per barrel – meaning anything past that is pure upside. In Europe, the challenge is to ensure adequate supply in the short-term as climate policy drives down demand in the long term.
The firm reported Q earnings of $2.4 billion, or $1.78 per share, and more than $2.8 billion in free cash flows. During the booming days of $150-per-barrel oil and ultra-deepwater drilling back in 2008, this was a problem for Baker. But with the focus by many energy firms squarely on U.S. shale, BKR’s products are now firmly in demand. In its third quarter, overall orders for products and services grew 6% sequentially. Despite being the largest energy company in the U.S., Exxon Mobil (XOM, $66.75) hasn’t been king in recent years. Lower commodity prices have continued to hurt its shale-oil assets, while the pandemic dented demand for liquefied natural gas and other fuels.
As of the fourth quarter of 2020, the firm cranks out approximately 300,000 barrels of oil, 25,000 barrels of natural gas liquids and around 920 million cubic feet of natural gas per day. And DVN’s earnings are now split roughly between crude oil and natural gas/NGLs production. This position has provided MPC with a steady base of earnings since its spinoff from exploration and production firm Marathon Oil back in 2011. According to EOG, the company can break even with oil at just $30 per barrel.
The 9 Best Energy Stocks To Buy For 2022
Finally, MPC’s sale of its Speedway convenience-store chain last year provided the company with plenty of extra cash on its balance sheet. The firm still has about $10.1 billion in leftover proceeds to spend, which it plans to use on extra buybacks, reducing its debt load and padding its dividend. The oil services firm has partnered with artificial intelligence software provider C3 AI to bring forth a whole series of services and data options for the oil patch.
XOM also has going for it a forward price-to-earnings (P/E) ratio of just 11 that’s in line with the energy sector and well below the broader market, as well as a dividend yield of more than 5%. DVN is one of the best energy stocks for 2022 because it features plenty of liquidity on its balance sheet and low near-term debt. It has been a wild ride for Baker Hughes (BKR, $25.68) to say the least.
Energy Prices Are Unlikely To Fall In 2022 Or Beyond
Prices have since fallen back as LNG deliveries have been diverted from Asia. But storage remains low, and a prolonged cold snap in Europe and/or Asia could see prices https://xcritical.com/ skyrocketing again . These growth ETFs offer exposure to higher-risk, higher-reward stocks while lessening the risk of a single stock torpedoing your returns.
The current energy crisis will eventually pass as more supply comes on the market. For now, governments in those countries impacted by high prices must hold their nerve and press on with decarbonisation. At the same time, fossil fuel producers should not be fooled into thinking that the good times are here to stay. What the current crisis does highlight is that the challenge of phasing down fossil fuels in an affordable and equitable manner is just as great as that of building up clean energy capacity. Aside from this possibility of Europe contributing to higher demand, it is higher LNG demand in emerging markets that will promote an expansion of natural gas production in the medium to long term. One potential issue is that higher gas prices may dissuade potential new importers like Vietnam from investing in import infrastructure, potentially lowering global demand.
Thanks to its base plus variable dividend model, that extra cash should flow right into investors pockets through buybacks and special dividends. And again, oil would need to crash to $30 per barrel for investors to start to worry about the base dividend payment. This diversification has helped Devon ride the waves in the energy market over the last few years. Plus, DVN has a breakeven point of $30 per barrel and $2.50 per MMBtu. With oil prices well above that, Devon is a profit and cash flow machine.
And speaking of those midstream assets, PSX is undergoing a major transformation. Last fall, the firm decided to swallow all the remaining public units of Phillips 66 Partners – its master limited partnership . For instance, back in 2019, when WTI averaged $60 per barrel, Magnolia recorded pre-tax net income of $100 million. Based on consensus estimates, with 2021’s average of $61.25 per barrel, Magnolia should record more than $570 million in pre-tax profits. Investors have been the ones to benefit, with EOG boosting its dividend twice this year and declaring a big $3.00 per share special dividend.
Eog Resources
And at just $36 per barrel, the firm has enough positive cash flow to fully fund its regular dividend payment. Using the UK’s spot price as a European benchmark, gas was trading at around £0.35 to £0.40 per therm in early 2020, but by May 2020 it had fallen to £0.084. In the thick of the pandemic, liquefied natural gas cargoes in the US were being cancelled due to a lack of demand and Gazprom in Russia was having to scale back production from its fields in Siberia. With a forward P/E of just 6.5x, a healthy 2.6% dividend yield and plenty of potential, it’s easy to see why CHK is one of the best energy stocks to buy for 2022 and beyond.
- The firm reported Q earnings of $2.4 billion, or $1.78 per share, and more than $2.8 billion in free cash flows.
- Because of the jump in crude oil prices, Devon has managed to produce nearly eight times the amount of free cash flows than it did at the end of 2020.
- After emerging from bankruptcy protection in early 2021 and shedding its huge debt burden, CHK is now a “lean and mean” energy firm, getting back to basics with its acreage and drilling plans.
- Plus, DVN has a breakeven point of $30 per barrel and $2.50 per MMBtu.
- As of the fourth quarter of 2020, the firm cranks out approximately 300,000 barrels of oil, 25,000 barrels of natural gas liquids and around 920 million cubic feet of natural gas per day.
- But in that time, DVN has transformed itself from being a nearly 100% natural gas focused energy stock into one with plenty of diversification in its portfolio.
BKR has historically trailed some of the bigger oil services stocks, namely Haliburton and Schlumberger . Then it was bought out by General Electric in 2017, only to be divested by the industrial conglomerate in 2019, with plans to sell its entire stake in the energy firm over the next few years. Baker Hughes has had more stock tickers than most companies, and recently went through a relisting on the Nasdaq. For investors naturally drawn to big-yielding blue chips, Exxon looks like one of the best energy stocks of 2022. And the “smart money” certainly agrees, with XOM one of the most popular stocks among the hedge fund crowd. This combination of growth and stability makes MPC one of the best energy stocks to buy for 2022.
We don’t think of the energy sector as being high-tech, but technology is revolutionizing the way we find and drill for oil. One of the reasons why BKR has always been sort of behind Halliburton and Schlumberger was its focus on North America. HAL and SLB tended to have more international operations, while Baker focused mostly on the U.S. and Canadian energy markets. Phillips 66 “represents a simplified story and the removal of certain ‘headaches’ can help PSX resonate further with investors as energy markets recover,” says Raymond James analyst Justin Jenkins. He has an Outperform rating on PSX, which is the equivalent of a Buy.
Kiplinger’s Weekly Earnings Calendar
Using the most recent official Energy Information Administration data, global benchmark Brent crude oil averaged $81 per barrel during December – a $38-per-barrel increase from November 2020. The U.S. benchmark, West Texas Intermediate oil, followed a similar trajectory higher. It is true that financial markets are doing their bit to curb extra fossil fuel production by turning away from financing the sector, but the net result may simply be to hand market share to national oil companies. The real answer lies in fossil-fuel-importing nations – the largest of which are China and India – demonstrating credible plans to decarbonise their economies and delivering on them. Yet in general, few significant oil and gas producing economies are going to stop investing in new production anytime soon.
With today’s high oil prices and record gas prices, it is easy to forget that the situation was reversed as recently as two years ago. At the end of 2019, an over-supply of fossil fuels had left producers concerned about low prices. Saudi Arabia and Russia fell out over the need for further production cuts to support prices. Then the scale and impact of the pandemic became apparent, economies locked down, and energy demand plummeted – most significantly for oil, given its links to transport. Because of the jump in crude oil prices, Devon has managed to produce nearly eight times the amount of free cash flows than it did at the end of 2020.
Relations with Russia, which exports gas to Europe via several pipelines, will remain critical to avoid expensive competition with Asia for LNG supply. The same cannot be said of the gas market, where prices vary significantly by region. North America is self-sufficient and has been enjoying relatively low prices, but consumers in Europe and Asia have to compete for marginal supplies on the global market. After emerging from bankruptcy protection in early 2021 and shedding its huge debt burden, CHK is now a “lean and mean” energy firm, getting back to basics with its acreage and drilling plans.
Even better is that Conoco has managed to take advantage of other energy stocks misfortunes to better itself. After you pull crude oil or natural gas out of the ground, you need to do something with it in order to make it usable. The base commodity is “cracked” under pressure into various fuels and other materials. One of the largest independent oil refiners in the U.S. is Phillips 66 (PSX, $78.32). Your wallet might be groaning every time you fill up your vehicle these days, but one sector of the market is smiling from ear to ear. The energy sector just led the market in performance in 2021, and the best energy stocks for 2022 are hoping for many of the same tailwinds to carry them to continued outperformance this year.
Considering the company’s former bankruptcy and prior financial condition, this is a major turning point. This means focusing on prolific natural gas plays like the Haynesville and Marcellus shales. All in all, Chesapeake has roughly 960,000 net acres in these two core fields alone. And with its recent acquisition of Vine Energy, CHK will be the biggest producer in Haynesville by far. Given the shale field’s location to the Gulf Coast, as well as its refiners and new liquefied natural gas terminals, this is a big win for CHK.
Exxon Mobil
In the first three quarters of 2021, Phillips 66 managed to produce adjusted EBITDA in its chemicals segment of $1.9 billion. That’s roughly double what it produced during all of 2020 and it still has one quarter in the fiscal year still left to report. The 8 cents per share it paid out was based on an average of $40-per-barrel oil, and management expects it can pay out 35 cents per share at an average of $55 per barrel.
Those are significant savings that go a long way to help improve the company’s profits. Thanks to those cost savings and overall higher demand, adjusted EBITDA at its refining operations improved by roughly $440 million sequentially in Q3. Before fracking and shale was a thing, EOG was a first mover into some of the more prolific shale fields in the U.S., including the Permian Basin, Eagle Ford and Bakken. This allowed the firm to amass some big-time acreage in these massive shale fields at rock-bottom prices. The win for EOG has been a low cost of production throughout its history. As the economy has started to recover and plastics demand has risen, PSX has been able to turn this focus into better earnings.
The Production Problem
In the third quarter of 2021, CHK managed to post adjusted net income of $269 million, or $2.38 per share. Devon estimates that, with oil at $80 per barrel, it should be able to produce a free cash flow yield of around 18% from its drilling activities. This should give it between $4.5 billion and $6 billion in free cash flows to hand out to investors – a greater than 40% improvement over 2020’s numbers. For one thing, MPLX – MPC’s master limited partnership – continues to see growth and makes sense from a tax perspective for the firm.
Read on as we look at the nine best energy stocks to buy for a continuation of higher oil and gas prices in 2022. This lack of commitment helps to explain why demand for fossil fuels has driven prices back up. With governments Investing in the oil and gas apparently less willing to lock down in the face of the omicron variant, oil demand will likely continue to recover at least in the short term. The environmental consequences of fossil fuel consumption are ever more apparent.
Magnolia Oil & Gas
ConocoPhillips is well-positioned in the new year to take full advantage of the high-oil-price environment. The company estimates that based on current oil prices, it should be able to give back nearly $7 billion to investors through dividends, share repurchases and special distributions. All in all, PSX represents a play on rising demand and a growing economy. With its better earnings potential, strong dividends and steady base of earnings, the stock is one of the best energy stocks to buy for the new year.