In this article, we will take a look at the 11 best American oil stocks to buy now. To see more such companies, go directly to 5 Best American Oil Stocks To Buy Now.
The oil industry notched record gains in 2022 and analysts are hopeful that the industry would continue to post record profits this year as they see no end in sight to the catalysts that gave boost to oil companies in the previous year. According to a latest report by Deloitte, in 2022, the global upstream industry was projected to generate its highest-ever free cash flows of $1.4 trillion at an assumed average Brent oil price of $106/bbl.
Recently, the International Energy Agency said that Russia’s output could decline by 14% in the first quarter of 2023. If Russia’s production declines, oil prices, which started the year on a lower note, could again start to climb towards new highs. The IEA believes that the full effects of the oil embargo on Russia would begin to show its effects in the coming weeks. The agency also increased its oil demand forecasts for 2023 by 300,000 barrels a day, mainly due to growth in India and China’s decision to remove COVID restrictions. Consumption in the year, according to the agency, is expected to grow by a whopping 1.7 million barrels a day to reach 101.6 million barrels a day.
JPMorgan in December also outlined its bullish thesis for the oil industry. According to Wall Street Journal, JPMorgan analysts said that while recession will keep the global economic growth in check, the oil industry will see a strong growth as countries like China begin to remove COVID restrictions. JPMorgan thinks that mobility fuels like gasoline, diesel and jet fuel will drive much of the demand increase.
JPMorgan also said that the G7 price cap would not be able to affect the Russian oil production significantly, while countries including the U.S., Canada, Argentina, Brazil, Norway and Guyana will combine to boost global production.
According to JPMorgan, the price of Brent crude will average $90 per barrel in 2023 and end the year at about $94.
In addition to the fundamental growth, the oil and gas industry will continue to pour billions in the green energy space. The Deloitte report said the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act will provide for about $450 billion of clean energy and related investments. The report also mentioned the Fit for 55 climate package passed by the European Commission and also the REPowerEU plan, which was launched to cut Europe’s reliance on Russian energy. The report said that together, the committed provisions for the clean energy transition and emissions reduction are close to €300 billion.
Photo by David Thielen on Unsplash
Our Methodology
For this article we scanned Insider Monkey proprietary database of 920 elite hedge funds and picked the top 11 American oil stocks. These oil stocks have solid fundamentals and long-term growth prospects. The list is ranked in an ascending order of the number of hedge funds having stakes in these companies.
Best American Oil Stocks To Buy Now
11. Hess Corporation (NYSE:HES)
Number of Hedge Fund Holders: 33
Ranking 11th on the list of the best American oil stocks, Hess Corporation (NYSE:HES) is a New York-based company that is involved in the exploration and production of crude oil and natural gas. In early December, Hess (NYSE:HES) declared a $0.375/share quarterly dividend, in line with the previous. A total of 33 hedge funds tracked by Insider Monkey reported having stakes in Hess Corporation (NYSE:HES) as of the end of the third quarter of 2022. The total value of these stakes is $1.22 billion.
In December, Barclays analyst Jeanine Wai upped the price target for Hess Corporation (NYSE:HES) to $155 from $145 and kept an Overweight rating on the shares. The update came after the company posted Q3 results.
10. Valero Energy Corporation (NYSE:VLO)
Number of Hedge Fund Holders: 47
Valero Energy Corporation (NYSE:VLO) is a major American energy company that performed exceptionally well in 2022. Valero Energy Corporation (NYSE:VLO) gained about 60% over the past 12 months. Valero Energy Corporation (NYSE:VLO) is also a dividend payer, with over a 3% dividend yield as of January 9. Valero Energy Corporation (NYSE:VLO) plans to cut its debt in the coming months. As of the end of the third quarter, the refiner’s debt came in at $5.6 billion. During the third quarter earnings call, Valero Energy Corporation (NYSE:VLO)’s management said that it has been working in the “right direction” since its debt to market cap ratio is 24.5% as of the end of Q3, compared to 40% during the COVID crisis.
9. Halliburton Company (NYSE:HAL)
Number of Hedge Fund Holders: 48
Halliburton Company (NYSE:HAL) is a Texas-based company that accounts for a major portion of the world’s hydraulic fracturing operations. In December, Raymond James gave a Strong Buy rating to the oil services company. The firm believes that Halliburton Company (NYSE:HAL) is expected to profit amid a favorable macro backdrop for the oil services industry. Raymond James’ James Rollyson said in a note to investors that “a sustained period of underinvestment during an exceptionally weak macro environment coupled with rising energy transition pressures set up the current oil supply situation.” Based on this thesis, the investment firm thinks the oil services industry will enjoy free cash flow generated for a “sustained period” because limited new capacity in the industry provides for an extended period of strong margins.
Aristotle Atlantic made the following comment about Halliburton Company (NYSE:HAL) in its Q3 2022 investor letter:
“Halliburton Company (NYSE:HAL) provides energy, engineering and construction services and is a manufacturer of products for the energy industry. The company offers services and products and integrated solutions to customers in the exploration, development, and production of oil and natural gas. Halliburton operates two business segments: Completion & Production and Drilling & Evaluation.
Our conviction in longer-term operating leverage is supported by the focus on improving cost structures. Upstream oil and gas spending over the longer term can benefit Exploration & Production (E&P) firms from sustained high oil and gas prices and a renewed urgency in global energy security. We believe the rightsizing of the company’s cost structure and forward focus on margins at the same time as E&Ps respond to new investment signals will drive both topline and bottom-line growth.”
8. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 49
Pioneer Natural Resources Company (NYSE:PXD) is an American oil company that is a part of the Fortune 500 list. Pioneer Natural Resources Company (NYSE:PXD) is a high dividend stock, with an 11% yield as of January 9. In October 2022, Pioneer Natural Resources Company (NYSE:PXD) announced that it plans to increase its productivity in 2023 by reshuffling its drilling portfolio to target wells with potentially higher returns. The company, according to Reuters, was planning to fire up about 24 to 26 drilling rigs in the period, compared to 22 to 24 rigs in 2022.
As of the end of the third quarter of 2022, 49 hedge funds tracked by Insider Monkey reported having stakes in Pioneer Natural Resources Company (NYSE:PXD), compared to 56 funds in the previous quarter.
7. Marathon Oil Corporation (NYSE:MRO)
Number of Hedge Fund Holders: 50
Marathon Oil Corporation (NYSE:MRO) is an Ohio-based petroleum refining company. Marathon Oil Corporation (NYSE:MRO) ranks 7th on the list of the best American oil stocks to buy now. Of the 920 hedge funds tracked by Insider Monkey as of the end of the third quarter, 50 hedge funds had stakes in Marathon Oil Corporation (NYSE:MRO), compared to 41 funds in the previous quarter. The most notable of these stakeholders include Ken Fisher’s Fisher Asset Management ($188 million) and John Overdeck and David Siegel’s Two Sigma Advisors ($135 million stake).
Back in October, Marathon Oil (NYSE:MRO) increased its quarterly dividend by 12.5%.
6. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 51
Devon Energy Corporation (NYSE:DVN) is one of the best American oil stocks to buy now. The Texas-based Devon Energy Corporation (NYSE:DVN) had 1,625 million barrels of oil equivalent reserves as of the end of 2021. It is one of the most favorite energy stocks of elite hedge funds. Of the 920 hedge funds tracked by Insider Monkey, 51 funds had stakes in Devon Energy Corporation (NYSE:DVN) as of the end of the third quarter, compared to 57 funds in the previous quarter. Devon Energy Corporation (NYSE:DVN) has took a beating over the past few months and weeks as the company suffered in the core markets and also had to decrease its dividend. However, analysts believe that China’s decision to reopen its market could be one of the much-awaited growth catalysts for Devon. Also, the company is expected to report a record 64% growth in full-year 2022 revenue, which can lift the stock higher.
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Disclosure: None. 11 Best American Oil Stocks To Buy Now is originally published on Insider Monkey.