With so many people focused on renewable energy companies these days, oil & gas stocks have largely become an afterthought for investors. While it’s safe to say that the rise of clean energy is a long-term trend worth buying into, that doesn’t mean that oil & gas companies can’t offer solid returns as well. Most of the top companies in oil & gas can offer shareholders great value at current prices, high dividend yields, and reliable cash flows.
We’ve come a long way since April 2020, when the price of West Texas Intermediate crude (WTI) fell into negative prices. Since then, the price of crude oil has almost rebounded to pre-pandemic levels. Natural gas prices have also been on the rise, which means that it might be time to consider adding shares of oil & gas companies.
Keep in mind that as consumers start to travel and life returns to a sense of normalcy, the demand for fuel will increase substantially and benefit companies in the energy space. We’ve put together a brief overview of 3 oil & gas stocks worth watching in 2021 so that you know what to keep an eye on if oil & gas prices continue to stabilize.
1. Enterprise Products Partners
Adding shares of a company that has a strong network of natural gas pipelines like Enterprise Products Partners (NYSE:EPD) makes a lot of sense if you want exposure to the industry. With over 50,000 miles of natural gas, natural gas liquids, refined products, and petrochemical pipelines, 260 million barrels of storage capacity for natural gas liquids, and 14 billion cubic feet of natural gas storage capacity, Enterprise is a key player in natural gas logistics. The company also offers nice growth potential as it expands in Gulf Coast export markets.
We mentioned that many oil & gas companies can pay high dividend yields thanks to their strong market positions, and Enterprise Products Partners is no exception. The stock currently offers investors an 8.4% dividend yield and has rewarded long-term shareholders with 22 consecutive years of dividend increases. There’s also a share repurchase program dating back to January 2019 that could boost share prices, along with a rebounding economy.
2. Phillips 66
Another strong option in oil & gas to keep an eye on this year is Phillips 66 (NYSE:PSX). The company was formed in a tax-free spin-off from ConocoPhillips (NYSE:COP) back in 2012 and is one of the largest independent refiners and marketers of petroleum products in the United States. The company generates the majority of its revenue with its Refining segment, which involves buying, selling, and refining crude oil in its 13 refineries. However, Phillips 66 also has a marketing and specialties segment, a chemicals segment, and a midstream segment that offer some additional diversity when compared to peers.
The stock hit a high of $123.97 back in 2018, which tells us that there’s plenty of upside potential at its current price levels. With a 4.69% dividend yield and a strong balance sheet including $2.5 billion in cash and cash equivalents at the end of Q4, Phillips 66 is a great option in the energy sector that could be substantially undervalued at this time. Also, the fact that it was able to continue paying out dividends throughout the pandemic while other oil & gas companies were forced to cut their payouts is a testament to this company’s strength.
3. EOG Resources
Last on our list of oil & gas stocks to watch in 2021 is a company that is the largest shale producer and one of the largest oil producers in the United States. If you aren’t familiar with the term shale oil, it is a type of oil that is found in shale rock and is extracted with special drilling processes like fracking. EOG Resources (NYSE:EOG) primarily operates in major producing basins in the U.S., Canada, offshore Trinidad, the U.K. North Sea, China, and more. This is a major advantage over the company’s competitors, as the diversification helps the company to support long-term production growth.
Like the other companies on our list, EOG has a strong balance sheet and can adequately deal with downturns in the price of oil. The company also continues to add new premium drilling opportunities to its portfolio with exploration efforts. Finally, a 2.49% dividend yield and the fact that it’s the premier shale producer makes EOG Resources worth monitoring in 2021.Leave a comment