3 Oil Stocks to Buy as Prices Continue to Boom

November 20, 2023
By The Investing Insider Staff

Key Takeaways:

  • Schlumberger (Ticker: SLB) is a leading oilfield services company that has shown strong revenue and profit growth in recent quarters, benefiting from core business strength and international expansion.
  • Williams Companies (Ticker: WMB) is a resilient midstream player executing key projects and signing long-term agreements, positioning itself to meet rising natural gas demand.
  • ConocoPhillips (Ticker: COP) has a strategic focus on low-cost assets and shareholder returns. Despite a recent earnings decline, it raised dividends, achieved production records, and made acquisitions to boost future output

Oil prices are on the move again. Brent crude recently hit $97 a barrel in September – its highest in 10 months. What’s driving this surge? And what does it mean for investors?

Several powerful forces have collided to light oil’s fuse:

  • Major producers Saudi Arabia and Russia slashing output…
  • America’s emergency oil supply running on empty…
  • The war between Hamas and Israel combined with tensions in the Middle East
  • China’s demand spike as its economy re-opens

This supply squeeze coincides with rising consumption – a recipe for price spikes.

What’s more, spare production capacity has evaporated. Any supply disruption could cause prices to soar higher.

And don’t forget about ever-present geopolitical tensions. These guarantee risky, premium-fueled volatility.

The kicker? Experts see demand growth outpacing sluggish supply expansion. This points to widening shortfalls in oil markets.

Brace yourself – this unbalanced dynamic may ignite the next leg up in oil’s endless rollercoaster ride.

Some projections estimate Brent crude could top $120 a barrel in the medium term – and stay elevated for the long haul.

Overall, oil has climbed back into a bullish stance. And savvy investors should take notice. The next price eruption could already be rumbling beneath the surface.

Today, we’ll take a look at three promising oil stocks poised to potentially benefit from the current upswing in the sector.

Top Oil Stock #1: Schlumberger Limited (Ticker: SLB)

Why We Think Schlumberger is a Top Stock:

Schlumberger Limited is at the forefront of the oilfield services industry, providing technology and services critical for oil and gas exploration and production.

With a strong presence in key markets and a reputation for technological innovation, Schlumberger is well-positioned to capitalize on the increasing demand for energy and the complexities of modern hydrocarbon development.

Latest Results:

Schlumberger has demonstrated strong financial performance, with revenues and net profits rising consistently over the last three quarters.

Revenue has grown from $7.73 billion to $8.31 billion, marking an average quarterly increase of 3.5%. Net profit has shown even more robust growth, increasing from $934 million to $1.12 billion, which translates to an impressive average quarterly growth rate of 8.8%.

This upward trend underscores Schlumberger's operational excellence and its ability to adapt to the market's demands while maintaining profitability.

Investing Insider Growth Catalysts:

  • Core Business Strength: Schlumberger's Core business, which includes the oil and gas sector, has grown by 22% year-to-date. This growth has been driven by the sector's broad multiyear cycle, diverse portfolio, industry-leading technology, and unique integration capabilities, leading to margin expansion and robust results in Reservoir Performance, Production Systems, and Well Construction.
  • International Market Expansion: Schlumberger's international revenue reached its highest since 2015, marking the ninth consecutive quarter of year-on-year growth. Strong performances in the Middle East & Asia, with significant gains in Saudi Arabia, the UAE, Kuwait, and Egypt, highlight the company's expanding global footprint.
  • Offshore Market Investment: Investments in offshore markets, notably Africa, Brazil, and Scandinavia, have been resilient. The recent completion of the OneSubsea Joint Venture with Aker Solutions and Subsea7 positions Schlumberger to broaden its offshore capabilities and market reach.
  • North American Revenue Quality: Despite a sequential decrease in revenue due to lower activity levels, Schlumberger has grown year-on-year in North America, surpassing the rig count. This is attributed to their focus on high-quality revenue and the delivery of differentiated technological value.

Top Oil Stock #2: Williams Companies (Ticker: WMB)

Why We Think Willaims Companies is a Top Stock:

Williams Companies stands as a resilient player in the midstream oil and gas industry, navigating a volatile energy market with strategic agility.

The company's consistent delivery of operational excellence, particularly in project execution and commercial ventures, aligns it well with the burgeoning demand for natural gas. Its recent accomplishments and development of key infrastructure projects, such as the Transco pipeline's Regional Energy Access, demonstrate its commitment to growth and efficiency.

Latest Results:

Williams Companies has reported an upward trajectory in financials, with revenue climbing from $2.48 billion to $2.55 billion over the last two quarters, reflecting a 3.0% average quarterly increase. Net profit has seen an even more substantial rise, with a 29.7% average quarterly increase from $460.0 million to $654.0 million.

This performance highlights the company's ability to enhance profitability amidst challenging market conditions.

Investing Insider Growth Catalysts:

  • Project Expansions: The successful completion of several projects, including expansions in the Haynesville region and the first expansion of the Cardinal gathering system in the Utica condensate window, showcases operational growth and a capacity to meet increasing market demand​​.
  • Long-term Agreements: The signing of precedent agreements for the Southeast Supply Enhancement project indicates a secure future revenue stream with 20-year contracts, promising the largest EBITDA contribution from a pipeline extension in the company's history​​.
  • Strategic Developments: Initiatives like the Uinta Basin expansion on the MountainWest system underpin the company's strategic direction towards accommodating future energy needs and market growth​​.

Top Oil Stock #3: ConocoPhillips (Ticker: COP)

Why We Think ConocoPhillips is a Top Stock:

ConocoPhillips is an American multinational corporation that explores, produces, transports, and markets crude oil, bitumen, natural gas, liquefied natural gas (LNG), and natural gas liquids.

The company emerges as a robust contender in the energy sector with a strategic focus on cost-efficient operations and shareholder returns.

Its commitment to a high-grade portfolio and disciplined M&A strategy, coupled with its consistent operational performance, positions it well in a consolidating industry. The acquisition of Surmont reflects a targeted approach to asset management, enhancing its 10-year plan with low-decline and low-capital intensity assets.

ConocoPhillips' diversification and advancement in international markets, particularly in LNG, are pivotal to its sustained growth amidst fluctuating oil prices and global demand dynamics.

Latest Results:

ConocoPhillips reported Q3 2023 earnings of $2.8 billion, marking a decrease from Q3 2022 earnings of $4.5 billion. Despite the downturn, the company showed resilience by announcing a 14% increase in its quarterly dividend to $0.58 per share, signaling confidence in its financial health.

Operational highlights include record production for the third consecutive quarter, with production of 1.81 million barrels of oil equivalent per day.

The company's strategic moves, like the Surmont acquisition and advancements in international LNG projects, have poised it for continued production and revenue growth​​​​.

Investing Insider Growth Catalysts:

  • Strategic Acquisitions: The Surmont acquisition complements ConocoPhillips' portfolio with a long-life, low-decline asset, enhancing its future production outlook with minimal capital requirements​​.
  • Global LNG Expansion: Progress in global LNG, including securing significant regas capacity in the Netherlands, positions the company strongly in the European market and contributes to its diversified portfolio​​.
  • Early Project Completions: The ahead-of-schedule start-ups of several international projects, including in Norway and China, underscore the company's operational efficiency and its ability to exceed project timelines, setting a strong precedent for future developments​​.
  • Production Milestones: Achieving record global and Lower 48 production, along with raising full-year production guidance, indicates operational excellence and the capacity to meet increasing energy demand​​.

Final Thoughts:

With fast-increasing oil prices as well as the supply-demand constraint in the energy sector, the stated companies, namely Schlumberger Limited (ticker: SLB), Williams Companies (ticker: WMB), and ConocoPhillips (ticker: COP) provide great opportunities for the short to medium term. These companies also have solid financial backgrounds supported by current macroeconomic conditions.

For investors looking to dive into the current bullish brigade in the sector, put these on your radar.

Frequently Asked Questions:

Q: Why is the oil market facing tighter supply currently?

A: Key factors like production cuts, diminished strategic reserves, insufficient investment, and geopolitics have constrained supply growth while demand rebounds post-pandemic.

Q: What makes Schlumberger well-placed to benefit from the oil boom?

A: Schlumberger has a strong core business, global footprint, tech innovation, and key strengths in areas like offshore and international markets with increasing activity.

Q: How has Williams Companies demonstrated resilience in the oil and gas midstream sector?

A: By efficiently executing projects, signing long-term agreements, and strategic expansions of infrastructure to accommodate future energy demand growth.

Q: What are some signs of continued strength for ConocoPhillips despite its recent earnings decline?

A: Achieving production records, raising dividends, bolstering its portfolio through acquisitions, and progress in global LNG projects.

-Investing Insider Staff
This article is informational purposes only and is not investment advice.  See full disclaimer here
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