In this article, we look at the 12 best oil stocks to buy according to hedge funds.
As per US Energy Information Administration, the US was categorised as the world’s top crude oil producer in 2018 and it maintained this position through 2021. U.S. oil refineries continue to obtain crude oil produced in the US and in other countries. There are different companies providing crude oil to the world market. In 2021, out of total U.S. crude oil production, Texas made a contribution of approximately 42.4%, while New Mexico and North Dakota made up approximately 11.1% and 9.9%, respectively.
Research by US Energy Information Administration shows that despite total U.S. crude oil production falling between 1985 and 2008, its annual production saw an improvement nearly every year from 2009 through 2019. An increase in production, primarily in the states of Texas, North Dakota, Oklahoma, New Mexico, and Colorado, was brought about by the implementation of more advanced drilling techniques. However, crude oil production in the US saw a downfall in 2020 and 2021 principally due to the COVID-19 pandemic.
Council on Foreign Relations highlighted that the US produces approximately 75% of its crude oil supply and 90% of its natural gas supply domestically. By the end of 2021, the country was producing around 100 billion cubic feet of gas per day and around 11 million barrels of crude oil per day.
The US Energy Information Administration estimates that without major policy changes, U.S. oil and gas production should remain high through 2050. This estimate remains stable even after considering the warnings from climate scientists and international agreements promoting an immediate transition to renewable energy sources.
In the latest December issue Short-Term Energy Outlook, EIA expects global oil inventories to decline 200,000 b/d in H1 2023 before they rise by approximately 700,000 b/d in H2 2023.
U.S. oil and gas industry is made up of several companies. Chevron Corporation (NYSE:CVX) and Exxon Mobil Corporation (NYSE:XOM) are considered as the biggest U.S.-based oil firms. Elsewhere, UK–based BP p.l.c. (NYSE:BP) and Shell plc (NYSE:SHEL) have dominant position in the US.
International Energy Agency (IEA), in their December issue oil market report, highlighted that global oil demand might contract by 110,000 b/d year-on-year in Q4 2022, touching 100.8 million b/d. This is up by 130,000 b/d against the agency’s report for November 2022. Strong gasoil use in main consuming countries surpasses weak European and Asian petrochemical deliveries. Despite seasonal slowdown in world oil demand and global challenges, recent oil consumption data exhibits optimism. This was mainly apparent in non-OECD regions, such as China, India and Middle East. As per IEA forecasts, oil demand should rise by 2.3 mb/d in 2022 and a further 1.7 mb/d next year.
Goldman Sachs’ Jeffrey Currie is quite optimistic about the outlook for commodities in 2023 principally due to recent trends being seen in China. Apart from this, he believes that the rebounding of PMIs in Europe and India should also lend support. China, which is the largest commodity consumer and largest oil importer in the world, is expected to lead the demand growth through much of 2023.
With this in mind, let us have a look at 12 Best Oil Stocks to Buy According to Hedge Funds
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Our Methodology
We used the latest holdings of The Energy Select Sector SPDR Fund (XLE) to short list oil stocks and then ranked these stocks using Insider Monkey’s proprietary hedge fund sentiment data. Here are the 12 best oil stocks to buy according to hedge funds.
12 Best Oil Stocks to Buy According to Hedge Funds
12. Pioneer Natural Resources Company (NYSE:PXD)
No. of Hedge Fund Holders: 49
Headquartered in Dallas, Texas, Pioneer Natural Resources Company (NYSE:PXD) is a large independent oil and gas exploration and production company. The company has operations in the United States.
The company has released its results for Q3 2022 and reported FCF of $1.7 billion. To further improve its top-tier FCF generation and return of capital, the company has increased return thresholds for wells to be included in its future development programs. Pioneer Natural Resources Company maintains strong balance sheet, with unrestricted cash on hand of $1.3 billion and net debt of $3.9 billion at the end of Q3 2022. For the fourth quarter of 2022, oil production is expected to average between 346.5 to 361.5 MBOPD and total production should average in the range of 655 to 680 MBOEPD.
Pioneer Natural Resources Company ranks 12th on our list of 12 Best Oil Stocks to Buy According To Hedge Funds.
Analysts at Barclays initiated the coverage on Pioneer Natural Resources Company, and reduced their price objective from $300.00 to $277.00. They gave an “Overweight” rating on the company’s shares on December 7.
At the end of the third quarter of 2022, 49 hedge funds in the database of Insider Monkey held stakes worth $851.4 million in Pioneer Natural Resources Company, compared to 56 in the previous quarter worth $696.1 million.
11. Marathon Oil Corporation (NYSE:MRO)
No. of Hedge Fund Holders: 50
Marathon Oil Corporation (NYSE:MRO) is an independent oil and gas exploration and production (E&P) company .
Marathon Oil Corporation has completed the acquisition of the Eagle Ford assets of Ensign Natural Resources. This acquisition was completed for total cash consideration of $3.0 billion after considering closing adjustments.
During the third quarter of 2022, the company returned 82% of adjusted CFO (over 100% of adjusted FCF) to equity investors. The company ended Q3 2022 with $1,109 million of cash and cash equivalents. In July 2022, revolving credit facility was extended by 3 years to 2027 and the company amended the capacity to $2.5 billion.
Marathon Oil Corporation raised its E.G. equity income guidance to $610 million at the midpoint from $540 million. This increase stemmed from strong operational performance and its differentiated exposure to the increase in European natural gas pricing. Apart from this, it has raised 2022 capital spending guidance to $1.4 billion from $1.3 billion.
VP Michael A. Henderson sold 80,000 shares of the company’s stock on November 8. The transaction was done at an average price of $32.56, totalling $2,604,800.00. Post this sale, VP owns 105,250 shares, valued at $3,426,940.
Analysts at Barclays increased their price target on the shares of Marathon Oil Corporation from $34.00 to $35.00. They gave an “Overweight” rating on the stock on December 7.
At the end of the third quarter of 2022, 50 hedge funds in the database of Insider Monkey held stakes worth $1.03 billion in Marathon Oil Corporation, compared to 41 in the preceding quarter worth $1.26 billion.
10. Marathon Petroleum Corporation (NYSE:MPC)
No. of Hedge Fund Holders: 50
Marathon Petroleum Corporation (NYSE:MPC) is a leading, integrated, downstream energy company. It operates the nation’s largest refining system. The company’s marketing system includes branded locations across the US, including Marathon brand retail outlets.
The company has released its results for the third quarter of 2022. It saw adjusted EBITDA of $6.8 billion against $2.4 billion for the third quarter of 2021. Market demand for its products was strong, and results were supported by improved operational and commercial execution. As of September 30, 2022, Marathon Petroleum Corporation had $11.1 billion of cash, cash equivalents, and short-term investments. It had $5 billion available on its RCF.
On November 3, analysts at The Goldman Sachs Group initiated coverage on the shares of Marathon Petroleum Corporation and they upped their price objective from $104.00 to $116.00, giving the “Neutral” rating.
50 hedge funds in Insider Monkey’s database had stakes in Marathon Petroleum Corporation as of the end of the third quarter. The total value of these stakes was $2.7 billion.
Apart from Schlumberger Limited (NYSE:SLB), ConocoPhillips (NYSE:COP) and Chevron Corporation, Marathon Petroleum Corporation is one of the 12 Best Oil Stocks to Buy According To Hedge Funds
9. Devon Energy Corporation (NYSE:DVN)
No. of Hedge Fund Holders: 51
Based in Oklahoma City, Devon Energy Corporation (NYSE:DVN) is one of the largest independent exploration and production companies in North America.
Devon Energy Corporation has released financial and operational results for Q3 2022. Production for Q3 2022 averaged 614,000 oil-equivalent barrels (Boe) per day, outpacing the guidance provided by the company by 2%. This performance stemmed from its Delaware Basin asset which was responsible for approximately 70% of total production. During Q3 2022, it closed on acquisitions in the Williston Basin and Eagle Ford for $2.5 billion.
Devon Energy Corporation ranks 9th on our list of 12 Best Oil Stocks to Buy According to Hedge Funds.
Analysts at Argus covered the shares of Devon Energy Corporation and they lifted their price objective on the company’s stock from $77.00 to $90.00. They gave a “Buy” rating on the company’s stock on November 17.
EVP Dennis C. Cameron sold 5,557 shares of the company’s stock on November 9 at an average price of $70.48, totalling $391,657.36. Post completion, the EVP owns 258,981 shares of the company’s stock, worth approximately $18,252,980.88.
According to Insider Monkey’s Q3 2022 database, 51 hedge funds held stakes worth $1.51 billion in Devon Energy Corporation, compared to 57 funds in the prior quarter worth $1.48 billion.
8. EOG Resources, Inc. (NYSE:EOG)
No. of Hedge Fund Holders: 52
EOG Resources, Inc. (NYSE:EOG) is an oil and gas producer having acreage in several U.S. shale plays, including the Permian Basin, the Eagle Ford, and the Bakken. The company has been ranked 8th on our list of 12 Best Oil Stocks to Buy According to Hedge Funds.
EOG Resources, Inc. now operates 7 significant resource basins given the addition of Utica Combo in Ohio. Its growing multi-basin portfolio of high-return plays places the company for long-term sustainable value creation. Total crude oil and condensate volumes for Q4 2022 is expected to be in the range of 460.8 MBod -469.2 MBod.
On November 11, Royal Bank of Canada raised their target price on the shares of EOG Resources, Inc. from $155.00 to $158.00, giving the stock a “Sector perform” rating in their research note.
EOG Resources, Inc. anticipates Utica Combo to be the next large-scale premium resource play. Supportive drilling environment and an opportunity to develop play with three-mile laterals should aid cost efficiencies.
According to Insider Monkey’s Q3 data, EOG Resources, Inc. was part of 52 hedge fund portfolios, compared to 43 in the prior quarter.
7. Diamondback Energy, Inc. (NASDAQ:FANG)
No. of Hedge Fund Holders: 55
Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company having its headquarters in Midland, Texas. It focuses on acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves mainly in Permian Basin in West Texas.
Diamondback Energy, Inc. announced that the company has been added to Nasdaq-100® Index. The company has also completed its acquisition of all leasehold interests and related assets of FireBird Energy LLC.
Diamondback Energy, Inc. has released its results for the third quarter of 2022. The company’s focus was on cost control and it continues to work on mitigating inflationary pressures associated with variable components of its cost structure through better operational techniques. It ended its Q3 2022 with free cash flow of approximately $1.2 billion, contributed by high cash margins and best-in-class well costs.
Analysts at Morgan Stanley covered Diamondback Energy, Inc. and upped their price objective on the shares of the company from $175.00 to $180.00. They gave an “Overweight” rating on the stock on December 14.
According to Insider Monkey’s database, 55 hedge funds were bullish on Diamondback Energy, Inc. at the end of Q3 2022, compared to 54 funds in the prior quarter.
6. EQT Corporation (NYSE:EQT)
No. of Hedge Fund Holders: 57
EQT Corporation (NYSE:EQT) is a leading independent natural gas production company. Its operations are focused on cores of the Marcellus and Utica Shales in Appalachian Basin.
In its Q3 2022 release, the company has raised its year-end 2023 debt reduction target from $2.5 billion to $4.0 billion, maintaining its long-term leverage target of 1.0-1.5x. For Q4 2022, the company’s total sales volume is expected to come between 450 Bcfe – 475 Bcfe. For the full year 2022, EQT Corporation expects total sales volume of between 1,925 Bcfe – 1,975 Bcfe.
The Goldman Sachs Group covered EQT Corporation on December 29 and it reduced its price target on the company’s shares from $55.00 to $49.00. It gave a “Buy” rating on the company’s shares on December 29.
According to Insider Monkey’s Q3 2022 data, EQT Corporation was part of 57 hedge fund portfolios. Their stakes were worth $2.11 billion. In the preceding quarter, 52 hedge funds were bullish on EQT Corporation.
Apart from Schlumberger Limited, ConocoPhillips and Chevron Corporation, EQT Corporation is one of the 12 Best Oil Stocks to Buy According To Hedge Funds
ClearBridge Investments, an investment management firm, published its third-quarter 2022 investor letter and mentioned EQT Corporation. Here is what the fund said:
“We also added natural gas company EQT in the energy sector. As one of the lowest-cost domestic producers, EQT stands to benefit from its position as a leading supplier of natural gas to a world suffering from critically low energy reserves. The Russian invasion of Ukraine and threats to hold natural gas exports hostage have spurred a surge in European energy prices, generating long-term agreements by European countries to purchase U.S. natural gas.
This strong demand and elevated prices have helped EQT strengthen its balance sheet and position it to take advantage as opportunities emerge for natural gas to plug the gaps in the global energy transition from fossil fuels to renewables.”
5. Schlumberger Limited (NYSE:SLB)
No. of Hedge Fund Holders: 63
Schlumberger Limited is a technology company which partners with customers to access energy by offering digital solutions and innovative technologies to enhance performance and sustainability for the global energy industry.
Schlumberger Limited announced that it has entered into an agreement for the acquisition of Gyrodata Incorporated, a company which specializes in gyroscopic wellbore positioning and survey technology.
Schlumberger Limited released its results for Q3 2022. It has posted revenues of $7.5 billion in the third quarter, exhibiting 10% growth as compared to Q2 2022 and 28% improvement year-on-year. Strong results for Q3 2022 exhibit acceleration of international momentum and strong execution across divisions and areas. Revenues and margins improved against Q2 2022 as growth pace in international business stepped up significantly. For full year 2022, Schlumberger Limited expects capital investment to be approximately $2.2 billion.
VP Kevin Fyfe decided to sell 6,095 shares of Schlumberger Limited on November 7. This transaction was done at an average price of $53.00, totalling $323,035.00. Following this, vice president owns 35,535 shares, valued at $1,883,355.
Analysts at Citigroup initiated the coverage on the shares of Schlumberger Limited. They upped their price target to $62.00 in a report dated November 16.
4. ConocoPhillips (NYSE:COP)
No. of Hedge Fund Holders: 64
ConocoPhillips is one of the world’s leading exploration and production companies.
ConocoPhillips distributed $4.3 billion to its shareholders in Q3 2022 and it announced an increase to its ordinary dividend which will come into effect in Q4 2022.
Production for the third quarter of 2022 came in at 1,754 thousand barrels of oil equivalent per day (MBOED), exhibiting an increase of 210 MBOED year-over-year. The company’s Lower 48 business unit accomplished record production of over 1 million barrels of oil equivalent per day.
Barclays covered ConocoPhillips on December 7 and raised its price objective from $135.00 to $151.00. It gave an “Overweight” rating on the shares of the company.
According to Insider Monkey’s third quarter database, 64 hedge funds were long ConocoPhillips, compared to 71 funds in the earlier quarter.
ClearBridge Investments, an investment firm, published its third quarter 2022 investor letter and mentioned ConocoPhillips. Here is what the fund said:
“ConocoPhillips handily outperformed the energy sector, which led the value benchmark. Its exposure to natural gas helped the stock perform more in line with natural gas E&Ps, which led the sector due to the European energy crisis and U.S. shale gas being considered a secure long-term source of liquid natural gas. In addition to COP’s low-cost resource base, conservative balance sheet and experienced management team, we appreciate its strong focus on ESG measures, which we believe is a good indicator of the quality of a company’s business model and management team.
Specifically, we appreciate solid governance practices with compensation metrics emphasizing ROCE and relative total shareholder return, the board’s effective oversight of management as well as the company’s methane flaring leadership. COP is investing in field electrification and carbon capture across its portfolio, with ambitions to deliver oil production with a CO2 intensity of sub-5 kg/BOE, which would be one of the lowest emission sources of supply in the world.”
3. Chevron Corporation (NYSE:CVX)
No. of Hedge Fund Holders: 66
Chevron Corporation is an integrated leading energy company. It produces crude oil and natural gas, manufactures transportation fuels, lubricants, petrochemicals and additives, and also develops technologies enhancing the business and industry.
Chevron U.S.A. Inc., a subsidiary of Chevron Corporation, has closed its acquisition of full ownership of Beyond6, LLC and its nationwide network of compressed natural gas stations.
Chevron Corporation has released its Q3 2022 results. The company saw earnings of $11.2 billion in Q3 2022 against $6.1 billion in Q3 2021. Its sales and other operating revenues were $64 billion against $43 billion in the year-ago period.
Analysts at Cowen upped their price objective on the shares of Chevron Corporation from $160.00 to $185.00 on October 31. They gave an “Outperform” rating on the company’s stock.
During Q3 2022, Chevron Corporation paid dividends of $2.7 billion (6% higher per share against Q3 2021), increased investments by more than 50% in comparison to last year, paid down debt for 6th consecutive quarter, and repurchased $3.75 billion of shares.
According to Insider Monkey’s data, 66 hedge funds were long Chevron Corporation at the end of Q3 2022, compared to 59 funds in the earlier quarter.
2. Occidental Petroleum Corporation (NYSE:OXY)
No. of Hedge Fund Holders: 74
Occidental Petroleum Corporation (NYSE:OXY) is an international energy company, having assets principally in the US, the Middle East and North Africa. The company is one of the largest oil producers in the U.S.
The company has released its Q3 2022 results. It surpassed production guidance midpoint by 25 Mboed, with production of 1,180 Mboed. Oil and gas pre-tax income for Q3 2022 came at $3.3 billion against pre-tax income of $4.1 billion for Q2 2022. Excluding the items which affect comparability, fall in oil and gas income against Q2 2022 was because of lower crude oil and natural gas liquids (NGL) prices. However, this decrease was limited by rise in sales volumes throughout commodities, higher gas prices and lower DD&A rates.
Morgan Stanley covered Occidental Petroleum Corporation and it raised its price target from $73.00 to $74.00, giving an “Equal weight” rating on December 14.
Occidental Petroleum Corporation ranks 2nd on our list of 12 Best Oil Stocks To Buy According To Hedge Funds.
A total of 74 hedge funds tracked by Insider Monkey held stakes in Occidental Petroleum Corporation at the end of third quarter of 2022. The value of their stakes was $15.6 billion.
Smead Capital Management, an investment management company, released its investor letter for Q3 2022. Here is what the fund said:
“Our top-performing stocks in the quarter includes Occidental Petroleum. Oil and gas have been the best game in the stock market town this year and it was a pleasant surprise to see home builders pick up even with dour news on interest rates and the economy. For the first three quarters of the year, we should change the name of our fund to the Jed Clampett Fund. Occidental Petroleum, was one of the standouts. Up through the bear market came a “bubblin’ crude!”
1. Exxon Mobil Corporation (NYSE:XOM)
No. of Hedge Fund Holders: 75
Exxon Mobil Corporation is one of the world’s largest publicly traded energy providers and chemical manufacturers. The company is engaged in developing and applying next-generation technologies to help meet the world’s growing needs for energy and high-quality chemical products.
Exxon Mobil Corporation ranks 1st on our list of 12 Best Oil Stocks To Buy According To Hedge Funds.
Exxon Mobil Corporation has released its results for Q3 2022. It posted earnings of $19.7 billion in Q3 2022 against $17.9 billion in Q2 2022. Excluding identified items, earnings came in at $18.7 billion and were up $1.1 billion against the prior quarter. This was due to higher natural gas realizations, record throughput in Energy Products, and cost control.
Analysts at HSBC lifted their price target on the shares of Exxon Mobil Corporation to $111.00 on December 2.
Insider Monkey’s database shows that 75 hedge funds ended the third quarter with stock in their portfolios, compared to 72 hedge funds in the previous quarter.
First Eagle Investments, an independent, privately owned asset management firm, published its second-quarter 2022 investor letter and mentioned Exxon Mobil Corporation. Here is what the fund said:
“Integrated oil and gas giant Exxon Mobil performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industrywide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”
You can also take a look at 12 Oil Stocks with Biggest Upside and 10 Best Oil Refinery Stocks To Buy
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This article is originally published at Insider Monkey.
