The oil price has soared to a 2½ year high above $112 a barrel. And it could rise further still, given the continuing turmoil in the Mideast and the strong growth in some of the world’s major economies.
Bad for the U.S. recovery, perhaps, but rising oil is good for oil company stocks. Three that you might like are ExxonMobil (XOM), Chevron (CVX), and Devon Energy (DVN).
Exxon, the largest U.S. oil company, saw profit surge 58 percent to $30.46 billion last year from $19.28 billion in 2009. Exxon’s oil and natural-gas production soared 9 percent during the fourth quarter to the equivalent of 4.97 million barrels a day, the highest level in company history.
Exxon planned $5 billion in stock repurchases last quarter, and analysts expect that activity to continue going forward. The company has increased its dividend by 36 percent in total over the past four years. Goldman Sachs analyst Arjun Murti raised his rating on Exxon’s stock last month, lifting his six-month price target to $102 from $82.
The company reported net income of $19.02 billion in 2010, up 82 percent from $10.48 billion a year earlier. Higher gasoline and diesel oil prices helped the company turn a $600 million loss for its refining and marketing unit during the fourth quarter of 2009 into a $742 million gain a year later.
Chevron has been dumping downstream assets outside core markets, which should give it capital to invest more profitably. Barclays, UBS, Credit Suisse, and Citigroup all have positive ratings on the stock (above hold or neutral).
Devon is one of the largest independent U.S. oil and gas producers. The company showed an impressive reversal last year, with net income of $4.55 billion after a $2.48 billion loss in 2009.
Devon is narrowing its focus to U.S. and Canadian onshore oil and gas, which should enable performance to improve further. Devon also owns more than 6,500 miles of pipelines in the United States, which guarantees speedy transport of its output.
Standard & Poor’s analyst Michael Kay has a four-star buy rating on the stock.
“We view positively DVN's repositioning as a high-growth onshore exploration and production company and believe the stock does not appropriately reflect its growth potential,” he wrote last month.
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