In this article, we discuss the 12 oil stocks with the biggest upside.
The petroleum industry, also known as the oil industry, includes the global processes of exploration, extraction, refining, transportation, and marketing of relevant products. The largest volume products of the industry are fuel, oil, and gasoline. However, the oil industry is usually divided into three major components: upstream, midstream, and downstream. Upstream regards exploration and extraction of crude oil, midstream encompasses transportation and storage of crude, and downstream concerns refining crude oil into various end products.
Oil is crucial to the global economic framework, impacting everything from transportation to heating and electricity to industrial production and manufacturing. The oil industry is one of the leading businesses in the world, generating approximately $5 trillion in global revenue as of 2022. 2022 has accelerated the stakes in terms of risk and uncertainty for oil giants, in part due to the Russian invasion of Ukraine. Russia is the third-largest producer of liquid fuels and petroleum and the war has had an impact on Brent crude oil and future prices.
Since February 2022, the prices of crude oil have been on an upward trajectory, reaching nearly $130/barrel in early March, and staying well above $100/barrel into April. However, they started normalizing towards the end of the year as production was increased and geopolitical certainty returned to the markets. Some of the top firms working in the sector include Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), among others discussed in detail below.
Even though oil stocks are good value for money in a market plagued by inflation, there is a fear among investors that the Ukraine crisis may accelerate the global shift towards renewables, like the Fit for 55 proposal in the European Union which aims to reduce greenhouse gas emissions by at least 55% in the region by 2030. However, despite these concerns, it is noteworthy that the oil and gas industry will likely enter 2023 with a healthy balance sheet and continued capital discipline, a hallmark of the sector.
EIA forecasts show that by 2025, Brent crude oil’s nominal price will rise to $67/barrel. By 2030, increased oil demand would result in Brent prices raised to $79/barrel. By 2040, prices are projected to be $84/barrel. A more modest prediction sees OPEC continuing to grow and push weight around, despite increased production from the US. By 2040, the cheaper oil sources will have been exhausted, and it would become more expensive to extract oil. It is estimated that by 2050, oil prices could be $90/barrel.
Our Methodology
The companies that have upcoming growth catalysts and operate in the oil sector were selected for the list. Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
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Oil Stocks With Biggest Upside
12. Antero Resources Corporation (NYSE:AR)
Number of Hedge Fund Holders: 18
Antero Resources Corporation (NYSE:AR) is an independent oil and natural gas company that acquires, explores for, develops, and produces natural gas, natural gas liquids, and oil properties in the United States. In late October, the firm posted earnings for the third quarter of 2022, reporting a revenue of more than $2 billion, up over 285% compared to the revenue over the same period last year and beating estimates by $80 million. The stock has also climbed in recent weeks after joining the S&P MidCap 400 Index.
On October 19, Jefferies analyst Lloyd Byrne initiated coverage of Antero Resources Corporation (NYSE:AR) stock with a Buy rating and $47 price target, noting that in response to a constrained capital cycle, energy’s Option Value has begun rising.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm D. E. Shaw is a leading shareholder in Antero Resources Corporation (NYSE:AR) with 3.7 million shares worth more than $114.2 million.
Just like Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Antero Resources Corporation (NYSE:AR) is one of the oil stocks with the biggest upside potential.
11. Magnolia Oil & Gas Corporation (NYSE:MGY)
Number of Hedge Fund Holders: 21
Magnolia Oil & Gas Corporation (NYSE:MGY) engages in the acquisition, development, exploration, and production of oil, natural gas, and natural gas liquids reserves in the United States. The stock has climbed since early November after posting better-than-expected earnings for the third quarter of 2022. The firm also set a quarterly record for production in the period, rising 21% compared to the previous year and 10% to the previous quarter to 81,500 boe/day. The estimates for the fourth quarter production are above 79,000 boe/day.
On November 17, Piper Sandler analyst Mark Lear maintained an Overweight rating on Magnolia Oil & Gas Corporation (NYSE:MGY) stock and raised the price target to $36 from $32, noting that the exploration and production models, as well as fiscal 2023 models, were updated based on third-quarter results.
Among the hedge funds being tracked by Insider Monkey, Winnipeg-based investment firm Cardinal Capital is a leading shareholder in Magnolia Oil & Gas Corporation (NYSE:MGY) with around 4 million shares worth more than $78.8 million.
In its Q1 2022 investor letter, Wasatch Global Investors, an asset management firm, highlighted a few stocks and Magnolia Oil & Gas Corporation (NYSE:MGY) was one of them. Here is what the fund said:
“Another strong stock in the Fund was Magnolia Oil & Gas Corp. (NASDAQ:MGY). Operating primarily in oil-rich South Texas, the company engages in the development, exploration and production of oil and natural gas. Sharply higher prices for oil and gas boosted Magnolia’s share price during the first quarter. We’re impressed by the company’s disciplined management team and consistent record of returning cash to shareholders regardless of the price of oil.”
10. PDC Energy, Inc. (NASDAQ:PDCE)
Number of Hedge Fund Holders: 28
PDC Energy Inc. (NASDAQ:PDCE) is an independent exploration and production company that acquires, explores for, develops, and produces crude oil, natural gas, and natural gas liquids in the United States. The company is steadily building a dividend profile as it establishes itself in the oil sector. On December 7, it declared a quarterly dividend of $0.35 per share, in line with previous. The forward yield was 2.11%. The firm also declared a special dividend of $0.65 per share, payable to shareholders by late December.
At the end of the third quarter of 2022, 28 hedge funds in the database of Insider Monkey held stakes worth $373.3 million in PDC Energy Inc. (NASDAQ:PDCE), compared to 35 in the previous quarter worth $647 million.
9. Kosmos Energy Ltd. (NYSE:KOS)
Number of Hedge Fund Holders: 30
Kosmos Energy Ltd. (NYSE:KOS) is a deep-water independent oil and gas exploration and production company that focuses along the Atlantic Margins. In earnings for the third quarter of 2022, the firm posted a more than 127% in revenue compared to the previous year, reaffirming production guidance for the 2022 fiscal year at 63,000 – 65,000 boe per day and fourth quarter guidance at 58,000 – 62,000 boe per day. Oil stocks were expected to witness strong cash flows in the second half of the year as winters increase the demand for fuel.
On November 9, Berenberg analyst James Carmichael maintained a Buy rating on Kosmos Energy Ltd. (NYSE:KOS) stock and raised the price target to 735 GBP from 710 GBP.
At the end of the third quarter of 2022, 30 hedge funds in the database of Insider Monkey held stakes worth $223.6 million in Kosmos Energy Ltd. (NYSE:KOS), compared to 25 in the preceding quarter worth $276.3 million.
8. Hess Corporation (NYSE:HES)
Number of Hedge Fund Holders: 33
Hess Corporation (NYSE:HES) is an exploration and production company that explores, develops, produces, purchases, transports, and sells crude oil, natural gas liquids (NGLs), and natural gas. On December 7, Hess Corporation declared quarterly a dividend of $0.375 per share, in line with the previous. The forward yield was 1.11%. In early December, the firm said it agreed to purchase high quality carbon credits for a minimum of $750 million through 2032 from the government of Guyana, as part of a long-term strategic partnership that aims to prevent deforestation and support sustainable development in the country.
On December 7, investment advisory Barclays maintained an Overweight rating on Hess Corporation (NYSE:HES) stock and lowered the price target to $155 from $145. Analyst Jeanine Wai issued the ratings update.
At the end of the third quarter of 2022, 33 hedge funds in the database of Insider Monkey held stakes worth $1.2 billion in Hess Corporation (NYSE:HES), compared to 35 in the preceding quarter worth $1.2 billion.
7. Coterra Energy Inc. (NYSE:CTRA)
Number of Hedge Fund Holders: 39
Coterra Energy Inc. (NYSE:CTRA) is an independent oil and gas company that engages in the development, exploration and production of oil, natural gas, and natural gas liquids in the United States. The firm has an impressive dividend history stretching back more than thirty years. Over the past six years, these payouts have registered consistent growth. In early November, the company declared a quarterly dividend of $0.68/share, a 4.6% increase from prior dividend of $0.65. The forward yield was 8.89%.
On December 12, Barclays analyst Jeanine Wai maintained an Equal Weight rating on Coterra Energy Inc. (NYSE:CTRA) stock and lowered the price target to $30 from $39, highlighting the third quarter results of the firm.
At the end of the third quarter of 2022, 39 hedge funds in the database of Insider Monkey held stakes worth $399.8 million in Coterra Energy Inc. (NYSE:CTRA), compared to 40 in the preceding quarter worth $437.4 million.
In its Q2 2022 investor letter, Palm Valley Capital Management, an asset management firm, highlighted a few stocks and Coterra Energy Inc. (NYSE:CTRA) was one of them. Here is what the fund said:
“We sold two Fund positions during the quarter which includes Coterra Energy (NYSE:CTRA). As a result of surging oil and natural gas prices, Coterra reached our valuation, and we exited the position in April.”
6. Ovintiv Inc. (NYSE:OVV)
Number of Hedge Fund Holders: 47
Ovintiv Inc. (NYSE:OVV) engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids. In early October, the firm renewed a share buyback program to purchase up to 24.85 million shares, or 10% of its public float, during the 12-month period ending October 2023. The firm also recently guided full year capital investment to total approximately $1.8 billion, at the high end of the previous capital guidance range.
On December 7, Barclays analyst Jeanine Wai maintained an Overweight rating on Ovintiv Inc. (NYSE:OVV) stock and lowered the price target to $60 from $69.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Marshall Wace LLP is a leading shareholder in Ovintiv Inc. (NYSE:OVV) with 4 million shares worth more than $187.6 million.
In addition to Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), and ConocoPhillips (NYSE:COP), Ovintiv Inc. (NYSE:OVV) is one of the oil stocks with the biggest upside potential.
In its Q2 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Ovintiv Inc. (NYSE:OVV) was one of them. Here is what the fund said:
“Oil and gas exploration and production company Ovintiv Inc. (NYSE:OVV) fell as oil prices faded late in the quarter due to aggressive Fed rate hikes and growing credit fears in emerging markets, a source of demand growth for oil. Although oil and fuel product inventories remain scarce, the Fed has been so aggressive with rhetoric and tightening that the dollar rose sharply and investor sentiment shifted toward anticipating a recession. Ovintiv is a self-help improvement story as it lowers debt levels through cash generation and asset sales while detailing plans to buy back shares more aggressively and pay a higher dividend.”
5. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Holders: 49
Pioneer Natural Resources Company (NYSE:PXD) operates as an independent oil and gas exploration and production company in the United States. Pioneer Natural Resources revealed that it will seek to lift productivity levels in 2023 by reshuffling its drilling portfolio to target wells with potentially higher returns. The firm is one of the most reliable players in the oil sector with a dividend history stretching back more than sixteen years. The sector median in this regard is just five years.
On December 7, Barclays analyst Jeanine Wai maintained an Overweight rating on Pioneer Natural Resources Company (NYSE:PXD) stock and lowered the price target to $277 from $300, highlighting that the company posted the third quarter results.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Pioneer Natural Resources Company (NYSE:PXD) with 769,600 shares worth more than $166.6 million.
In its Q1 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Pioneer Natural Resources Company (NYSE:PXD) was one of them. Here is what the fund said:
“Pioneer Natural Resources (NYSE:PXD) performed well in a strong energy sector. Pioneer stood out recently with a pledge to return a large majority of free cash flow to shareowners through dividends and stock buybacks, and ended hedging to give shareowners more earnings and dividend potential should oil and gas prices continue to rise.”
4. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Holders: 55
Diamondback Energy, Inc. (NASDAQ:FANG) is an independent oil and natural gas company that focuses on the acquisition, development, exploration, and exploitation of unconventional and onshore oil and natural gas reserves in the Permian Basin in West Texas. On November 7, Diamondback Energy declared a quarterly dividend of $0.75 per share in line with the previous. The company also declared a $1.51 variable cash dividend for the third quarter. The forward yield was 1.86%.
On December 8, KeyBanc analyst Tim Rezvan maintained an Overweight rating on Diamondback Energy, Inc. (NASDAQ:FANG) stock and lowered the price target to $171 from $182, highlighting that in the fourth quarter, oil prices have been worse than expected as a result of worries about lockdowns in China.
At the end of the third quarter of 2022, 55 hedge funds in the database of Insider Monkey held stakes worth $910.9 million in Diamondback Energy, Inc. (NASDAQ:FANG), compared to 54 in the previous quarter worth $811.4 million.
In its Q1 2021 investor letter, Miller Value Partners, an asset management firm, highlighted a few stocks and Diamondback Energy, Inc. (NASDAQ:FANG) was one of them. Here is what the fund said:
“Diamondback Energy (FANG) returned 14.4% in the quarter as the oil price rose and fell during the quarter ending the period largely in the same place that it started. The company reported strong 3Q results beating on the top and bottom lines. The company reported revenue of $1.9B beating the consensus of $1.5B with EPS of $2.94 beating expectations for $2.79. The beat was driven by a combination of higher volumes, higher realizations, and efficiency gains. The company increased its total production guidance for the year to 370-372mboe/d1 (up from 363-370mboe/d) while lowering Capital Expenditure (CAPEX) guidance for the second time this year to $1.49-1.53B. The company raised the dividend for the third time this year to $2/share annually while authorizing a new $2B share repurchase program. Starting in 4Q21, the company plans to return 50% of Free Cash Flow to shareholders through the base dividend and a combination of buybacks and special dividends. Finally, the CEO Travis Stice announced plans to reduce methane emissions by 70% as part of the firm’s ESG initiative.”
3. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Holders: 57
EQT Corporation (NYSE:EQT) operates as a natural gas production company in the United States. The firm is one of the top natural gas stocks in the US and has benefited from the recent rise in natural gas prices as winter season approaches and the demand increases. The is also priced at just 4x cash flows, making it an interesting value proposition. The firm expects to generate reliable long-term returns, giving capital back to shareholders as it does so.
On November 17, Piper Sandler analyst Mark Lear maintained an Overweight rating on EQT Corporation (NYSE:EQT) stock and raised the price target to $63 from $62, noting that the exploration and production models, as well as fiscal 2023 models, were updated based on third-quarter results.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Soroban Capital Management is a leading shareholder in EQT Corporation (NYSE:EQT) with 6.5 million shares worth more than $263.6 million.
In its Q2 2022 investor letter, ClearBridge Investment, an asset management firm, highlighted a few stocks and EQT Corporation (NYSE:EQT) was one of them. Here is what the fund said:
“We also added natural gas company EQT (NYSE: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.”
2. ConocoPhillips (NYSE:COP)
Number of Hedge Fund Holders: 64
ConocoPhillips (NYSE:COP) explores for, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids worldwide. On November 29, ConocoPhillips and QatarEnergy announced agreements to supply 2 million per year metric tons of liquefied natural gas to Germany for 15 years starting in 2026, as Germany seeks to cover future gas needs following the rupture of its energy relationship with Russia.
On December 7, Barclays analyst Jeanine Wai maintained an Overweight rating on ConocoPhillips (NYSE:COP) stock and lowered the price target to $151 from $134.
At the end of the third quarter of 2022, 64 hedge funds in the database of Insider Monkey held stakes worth $2.7 billion in ConocoPhillips (NYSE:COP), compared to 71 in the previous quarter worth $2.4 billion.
In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and ConocoPhillips (NYSE:COP) was one of them. Here is what the fund said:
“We redeployed capital into ConocoPhillips (NYSE:COP), which was trading at a discount to our estimate of intrinsic value and is well positioned over the long run due to its low-risk asset base.”
1. Occidental Petroleum Corporation (NYSE:OXY)
Number of Hedge Fund Holders: 74
Occidental Petroleum Corporation (NYSE:OXY) engages in the acquisition, exploration, and development of oil and gas properties in the United States, the Middle East, Africa, and Latin America. In late November, the firm announced that it had signed a letter of intent with Enbridge to explore the joint development of a carbon dioxide pipeline transportation system and sequestration hub in the Corpus Christi area on the Texas Gulf Coast. The former plans to build as many as 135 direct air carbon capture facilities by 2035.
On December 7, Barclays analyst Jeanine Wai maintained an Overweight rating on Occidental Petroleum Corporation (NYSE:OXY) stock and lowered the price target to $74 from $84.
Among the hedge funds being tracked by Insider Monkey, Omaha, Nebraska-based firm Berkshire Hathaway is a leading shareholder in Occidental Petroleum Corporation (NYSE:OXY) with 194.4 million shares worth more than $11.9 billion.
In its Q3 2022 investor letter, Smead Capital Management, an asset management firm, highlighted a few stocks and Occidental Petroleum Corporation (NYSE:OXY) was one of them. Here is what the fund said:
“Our top-performing stocks in the quarter include Occidental Petroleum (NYSE:OXY). 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 (NYSE:OXY), was one of the standouts. Up through the bear market came a “bubblin’ crude!”
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Disclosure. None. 12 Oil Stocks With Biggest Upside is originally published on Insider Monkey.
