BP plc (ADR) (BP), Chevron Corporation (CVX), Tesoro Corporation (TSO): These Energy Companies Are Must Buys

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Chevron’s global expansion initiatives have been a center of attraction for the market as well as investors. Along with this, its continuous share buyback plans have been diverting investors’ opinions. I recommend a buy for this stock.

Tesoro Corporation (NYSE:TSO)

BP has agreed to sell its Carson Refinery to Tesoro for $2.5 billion. But, the deal is awaiting a green signal from the Federal Trade Commission (FTC) and from the California Attorney General. Tesoro Management is quite optimistic about getting the government’s approval on the acquisition of BP Carson. This deal will boost Tesoro’s barrels per day production substantially to 528,000. It means the company will contribute around 27% of the total gas production in California. With the announcement of this acquisition, the stock of Tesoro has been performing extremely well with a gain of ~31% since December, 2012. The closure of this deal in 2013 will further lead to an upside movement of the stock.

During the last quarter, the company has bought back shares worth $140 million and it will further buyback shares worth $360 million in 2013. Additionally, Tesoro recently declared that it is going to close its Kapolei refinery operations in Hawaii by April, 2013. The Company will use the refinery campus as its storage complex. I expect this discontinued operations will free up around $300 million to $350 million of cash and the company may utilize these funds for further buy back of shares too.

Overall, I am bullish on this stock looking at its deal with BP and the company’s commitment towards the buyback programs. I recommend a buy for this stock expecting huge returns in the near future.

Conclusion

During the past few years, energy stocks have appeared as a shining star for the investors around the world. Their higher than expected return has forced more and more investors to include energy stocks in their portfolio. The three companies discussed above are well-placed in this sector with their solid pipeline of projects and lucrative deals. Moreover, these companies remain faithful towards their investors with the continuous buyback programs. I recommend a buy for all three stocks.

The article These Energy Companies Are Must Buys originally appeared on Fool.com and is written by Shweta Dubey.

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