There’s Value Left in Energy, But Don’t Wait Too Long to Buy: Valero Energy Corporation (VLO), Chevron Corporation (CVX)

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As the market continues to rise, the pure upstream oil and gas businesses must be feeling left out. Many integrated oil companies are a little neglected as well, refiners not so much. Value in the energy sector continues to exist even for the refiners, however, so I'll get that out of the way first.

The world's largest independent refiner still has room to run...

Owning 16 petroleum refineries with a combined throughput capacity of approximately 3 million barrels per day, Valero Energy Corporation (NYSE:VLO) is the world's largest independent refiner, and has recently been a favorite in my portfolio for its great performance. The stock still has room to rise as well, as long as domestic oil stays cheap.

Valero Energy Corporation (NYSE:VLO)The company saw a whopping 20% increase in profit as well as significantly higher gross refining margins-- largely due to its reliance on cheap domestic crude. The company is also looking to find more cheap U.S. crude, and is spending $30 million to create a new crude oil receiving terminal for its refinery in Benicia, located in Northern California. According to a company spokesman:

"Right now, our California refineries have the lowest operating income of our system but the highest operating cost--that needs to change... Crude by rail is a relatively low-cost project that can significantly improve that refinery's competitiveness."

The company is looking to gain another 70,000 barrels a day from its new terminal, which will help cut costs and also improve profits for one of the company's weaker refineries. Valero Energy Corporation (NYSE:VLO) expects to complete the project by 2014. I see no reason for this company to slow down, especially when there is a glut in cheap U.S. oil that Valero can take advantage of. The company currently trades at only about 12-13 times earnings, carrying a lowly forward P/E of only around 8.5.

The integrated oil and gas giants need some love as well...

Another seemingly cheap company is  Chevron Corporation (NYSE:CVX) . Grabbing this behemoth sooner rather than later would probably be a good idea. The company is diversified in many things other than just oil: such as mining, chemicals, power generation, and most importantly -- natural gas.

Chevron is a leader in liquefied natural gas, and the company is continuing to invest in it. Besides leading the development of the Gorgon and Wheatstone LNG projects located in Australia, the company is also looking to expand its involvement with the country even further by investing in shale assets that cover an area 3 times the size of Hong Kong. Chevron Corporation (NYSE:CVX) is number two behind Exxon Mobil Corporation (NYSE:XOM) , the world's largest international oil and gas company. Exxon is also the largest producer of natural gas in the U.S.

With natural gas getting a thumbs up from both Warren Buffett and Jim Cramer, it seems like now may be a good time to get in the game early. Exxon Mobil and Chevron are both big players in natural gas, and are investing in it to offset the potential fall in oil prices. With both Chevron and Exxon trading at low price to earnings multiples of around 9, they look cheap as well. Chevron Corporation (NYSE:CVX) also pays a nice dividend, yielding about 3%, while Exxon yields around 2.5%.

These two companies make for great long-term investments, period, and with oil demand expected to rise 5% this year in China -- both companies may benefit from increasing oil demand as well. Both integrated companies, like Valero Energy Corporation (NYSE:VLO), are also seeing improved results with their refineries, with Exxon quadrupling its year-over-year downstream earnings last quarter. Chevron also saw increasing profits and higher refining margins last quarter.

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