3 Energy Stocks to Buy as Oil Prices Nears $80

Crude oil prices rallied this week after the October OPEC+ meeting. Brent, the global benchmark, rose to a seven-year high of $82.39 and West Texas Intermediate (WTI) rose to more than $79.

OPEC+ decided to increase oil production by about 400k barrels per month until the fourth quarter of 2022. This was significantly below what analysts were expecting. 

Demand for oil is also rising at a faster pace than earlier expected. In a recent report, the International Energy Agency (IEA) said that it expects that demand will rise to 100.8 million barrels per day in 2022. 

Today we’ll take a look at three energy stocks that should continue to benefit from higher oil prices:  Marathon Oil (MRO), Devon Energy (DVN), Diamondback Energy (FANG).

Marathon Oil (MRO)

Marathon Oil Corporation is an oil and gas company valued at more than $11 billion. The company has operations in the United States and Africa. In the US, it mines crude oil, natural gas, and condensate at Eagle Ford, Baken, Oklahoma, and Northern Delaware. It also has operations in Africa. 

In the second quarter, Marathon Oil had a revenue of more than $1.259 billion, which was better than the previous quarter’s $1.18 billion. It also managed to turn a profit, which came in at more than $19 million. 

With oil and natural gas rising, analysts believe that the company will increase its revenue and profitability in the coming quarters. 

Analysts expect that the company’s revenue rose from $1.14 billion in the second quarter to more than $1.24 billion. Its earnings per share is expected to rise to $0.29.

Shares of Marathon Oil have outperformed in 2021 and are up 126%, compared to the Vanguard Energy ETF (VDE) which has risen by just 48%.

Marathon Oil vs VDE and S&P 500

Source: Trading View

Devon Energy (DVN)

Devon Energy is an oil and gas company that produces more than 300k barrels of oil per day. It produces more than 125k barrels of natural gas liquids and 920 million cubic feet of natural gas. Therefore, with the price of these commodities rising, the company is expected to reverse its last year’s performance.

In 2020, the company’s revenue crashed from more than $6.2 billion to about $4.5 billion. It also expanded its loss from more than $355 million to about $2.6 billion. In just the first two quarters of the year, Devon’s revenue of more than $5.43 billion was higher than what it brought in for all of 2020. Analysts expect the company’s revenue to rise $3.15 billion in the third quarter while its earnings should reach $0.89. 

Devon’s stock price has jumped by more than 140% this year. 

Devon Energy vs Vanguard Energy ETF and S&P 500

Source: Trading View

Diamondback Energy (FANG)

Diamondback Energy is an oil and gas company focused on the Permian Basin. The company’s share price has jumped by more than 115% this year, bringing its total market capitalization of $18.85 billion.

The company’s management took steps to reduce its cost and boost its shareholder returns. In the second quarter, the management committed to paying part of its debt and increasing its dividend by about 12.5%. It also committed to distributing 50% of its free cash flow to shareholders in 2022. 

Diamondback will take advantage of the relatively higher oil and gas prices to boost its income. Analysts expect that its revenue in the third quarter will grow to $1.47 billion. Its EPS is also expected to grow to $2.65.

Meanwhile, the Diamondback stock price is trading at $105 and analysts expect that this trend will continue. The most optimistic analysts are from Truist, who believe that the shares will keep rising to $148. 

Diamondback vs VDE and S&P 500:

Source: Trading View