top-notch Petroleum Shares of 2022: Mastering Oil Investments
Oil companies are crucial players in the global economy, providing fuel for transportation and power, as well as essential ingredients for petrochemicals used in making products like plastics, rubber, and fertilizer. However, the oil industry is highly competitive and volatile. Profits and losses can swing wildly based on small shifts in demand or moves by petrostates like Saudi Arabia and Russia. Supply and demand imbalances can cause huge fluctuations in oil prices.
While the long-term prospects of the oil and gas industry are being increasingly influenced by climate change and the shift towards renewable energy, there are still opportunities in the oil patch. Here's a closer look at some of the top oil stocks and factors to consider before buying:
Top oil stocks to buy
| Oil stock | Ticker Symbol | Description || --- | --- | --- || ConocoPhillips | NYSE:COP | A global E&P company. || Devon Energy | NYSE:DVN | A U.S.-focused E&P company. || Enbridge | NYSE:ENB | A Canadian energy infrastructure giant. || ExxonMobil | NYSE:XOM | A large-scale, integrated oil supermajor. || Phillips 66 | NYSE:PSX | A leading refining company with midstream, chemical, and distribution operations. |
Let's take a closer look at these top oil stocks:
1. ConocoPhillips
ConocoPhillips is one of the largest E&P-focused companies in the world. It specializes in finding and producing oil and natural gas, with operations in over a dozen countries. ConocoPhillips benefits from scale and access to some of the lowest-cost oil on earth, including significant exposure to the Permian Basin. It bulked up its position in that low-cost, oil-rich region in 2021 by acquiring Concho Resources and Shell's assets in the area. With average costs of about $40 per barrel and many of its resources even cheaper, ConocoPhillips can generate lots of cash flow in almost any oil market environment.
(NYSE:COP)
Given the uncertainty surrounding future oil demand, ConocoPhillips plans to return a significant portion of its free cash flow to investors in the coming years. It plans to pay a steadily growing dividend, repurchase shares, and pay a variable return of cash based on its excess cash. The company's top-tier balance sheet, with a low leverage ratio for the sector and lots of cash, makes it one of the safest E&P investments.
A global E&P company.
2. Devon Energy
Devon Energy is a U.S.-focused E&P company with diversified operations across several low-cost, oil-rich basins. Its diversification allows it to produce plenty of low-cost oil and natural gas, generating ample cash. The company launched an industry-first, fixed-plus-variable dividend framework in 2021. It pays out as much as 50% of its excess cash flow each quarter via variable dividend payments after funding its fixed base dividend and capital expenses. Devon uses the rest of its excess cash to strengthen its balance sheet and repurchase shares.
(NYSE:DVN)
Devon's dividend strategy makes it an enticing option for income-focused investors. They can collect a steady base dividend that's sustainable throughout the oil price cycle and have the potential to earn significant payments during periods of high prices.
A U.S.-focused E&P company.
3. Enbridge
Enbridge operates one of the biggest oil pipeline systems in the world, transporting 30% of the oil produced in North America. Enbridge also has an extensive natural gas pipeline system, a natural gas utility business, and renewable energy operations. Enbridge's pipeline operations generate stable cash flow backed by long-term contracts and government-regulated rates. This cash flow allows it to pay a high-yield dividend while investing in expanding its energy infrastructure operations.
(NYSE:ENB)
Enbridge has made significant investments in recent years in infrastructure geared towards cleaner energy, including offshore wind energy in Europe and hydrogen. These investments position Enbridge for the future of energy while remaining vital to supporting the oil market's current needs.
A Canadian energy infrastructure giant.
4. ExxonMobil
As one of the largest oil companies on the planet, ExxonMobil is a fully integrated supermajor. It operates in every segment of the oil and gas industry, including E&P, midstream, petrochemical manufacturing, refining, and marketing refined and petroleum products to customers. ExxonMobil has focused its recent efforts on reducing its business costs and boosting efficiency. These investments are beginning to pay off, as the company has significantly lowered its oil production costs over the past couple of years.
(NYSE:XOM)
ExxonMobil has a solid financial profile, with an investment-grade balance sheet and very manageable debt. It also has lots of cash on hand. Its low debt and high cash reserves enable it to invest in expansion projects, including renewable fuels. In 2023, Exxon acquired Pioneer Natural Resources, solidifying its standing as one of the lowest-cost producers for the next decade.
A large-scale, integrated oil supermajor.
5. Phillips 66
Phillips 66 is one of the leading oil refining companies, with operations in the U.S. and Europe. It also has investments in midstream operations and in petrochemicals via its CPChem joint venture with Chevron. Its marketing and specialties business distributes refined products and manufactures specialty products such as lubricants. Thanks to its large-scale, vertically integrated operations, Phillips 66 is among the lowest-cost refiners in the industry. This is the result of leveraging its integrated midstream network to obtain the lowest-cost crude for refining and petrochemical feedstocks, as well as its investments in projects that give it higher margins on its products.
(NYSE:PSX)
Phillips 66 also boasts a strong financial profile, with an investment-grade balance sheet and very manageable debt. It also has lots of cash on hand. Its low debt and high cash reserves enable it to invest in expansion projects, including renewable fuels. The company has been a dividend growth superstar and a share buyback dynamo over the past decade, and its focus on making smart investments and returning cash to investors should enable it to continue enhancing shareholder value in the coming years.
A leading refining company with midstream, chemical, and distribution operations.
When considering investing in top oil stocks in 2025, several factors should be taken into account. These include geopolitical events, global demand and production, production levels and trends, company performance and financial health, regulatory environment and policy support, market volatility, correlation with crude prices, economic indicators, and company-specific catalysts. By carefully evaluating these factors, investors can make more informed decisions when investing in top oil stocks.
Investing wisely in the volatile oil industry requires considering various factors, such as company performance, financial health, and the regulatory environment. For instance, ConocoPhillips, with its low-cost operations in the Permian Basin and a conservative dividend strategy, could be an attractive option for investors looking for stable returns.
Given the ongoing shift towards renewable energy, energy companies like Enbridge are also investing in cleaner energy sources like offshore wind and hydrogen, ensuring their relevance in the changing landscape of finance and energy.
