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Oil Stocks – Top Oil Stocks to Buy

Posted on Monday, December 23rd, 2019 by Matthew Sweeney

Oil Stocks – Top Oil Stocks to Buy

There are many oil companies around the world that trade their shares on a stock market. With all of the different choices, it can be tough knowing which stock is the best for your portfolio. Before making a decision, it can be helpful to examine the top-performing oil companies.

Top Oil Companies in the World

Oil companies around the world provide key services, such as mining or extracting raw materials, processing, refining, transporting, and even distributing through service stations. Products include crude oil, natural gas, coal, hydrocarbons, Liquefied Natural Gas (LNG), Liquefied Petroleum Gas (LPG), and more. These companies may also focus on research and improvements in these areas.

Oil Industry

Crude oil or petroleum can be refined into many useful products like gasoline, plastics, and jet fuel. There are many petroleum-exporting countries who also import petroleum for a variety of reasons. A majority of production is used to fuel transportation worldwide. Complex infrastructure, costly overhead, and fluctuating prices introduce volatility to oil company stocks. Many oil companies operate worldwide facilities, pipelines, transportation networks, service stations, and more. Global markets and political forces have allowed key players to emerge and spread both upstream and downstream in order to secure their market share. An example of downstream expansion would be an oil exploration company funding a refinery or a service station.

There are some serious downsides to using fossil fuels, such as environmental harm caused by mining, health hazards, and harm due to accidents and disasters. Moreover, the infrastructure to produce and carry oil and natural gas is complex, spanning entire continents in the form of pipelines and transportation networks. These networks and related facilities are vulnerable to attacks, like the one on the Saudi Arabian state-owned oil giant Aramco. Currently, the American Petroleum Institute places the oil and natural gas industry at 8% of the U.S. economy.

The oil industry is heavily regulated. In the U.S. there are many local, state, and federal laws that impact markets, such as the Clean Air Act of 1963, the Clean Water Act of 1972, the Safe Drinking Water Act of 1974, and many more. Some laws and regulations are even applicable up to 9 nautical miles from shore. Stock markets and securities are also heavily regulated in order to help protect investors.

How to Value an Oil Stock?

There are many ways to value a company in order to compare stocks. One way is to look at investor response to company performance measures such as stock price history. Investors who aim to earn dividend income can compare dividends across companies or earning per share. Investors can also look to the financial reports, such as income statements, balance sheets, and cash flow statements for information. One can use formulas, ratios, and technical analysis to determine financial benchmarks for companies they want to compare.

Savvy investors go to a trusted source like Marketbeat, which already calculates these ratios and organizes important information in a way that is easy to read and understand. These financials can include earning per share (EPS) debt to income ratio, return on assets, price to earnings, and the current ratio to name a few. Marketbeat also provides company information, reports on dividends and dividend history, as well as other useful information like the most active stocks.

Top Oil Companies in the World

The oil industry revolves around the fossil fuels of crude oil, natural gas, and coal and their byproducts. This industry includes many different aspects such as research, exploration, gathering, refining, transporting, and more.

Chevron stock currently trades on the New York Stock Exchange (NYSE) under ticker symbol CVX. Founded in 1879, the Chevron Corporation is an integrated oil and gas company operating worldwide in the petroleum refining industry. With annual sales of $166.34 billion and a net income of $14.82 billion, Chevron is a major player in this industry. Based in San Ramon California, Chevron operates across the oil industry both upstream and downstream from offshore drilling to more than 7,800 Chevron and Texaco retail service stations. Four Chevron refineries in the United States can process over 932,000 barrels of oil per day. The company has over 1.89 billion shares outstanding at a price of $116.23 per share for a market capitalization of $219.78 billion.

One of the reasons Chevron makes such a good investment is because of the massive amount of infrastructure and capital invested in operations including pipelines and a fleet of crude tankers and carriers. Chevron also makes massive investments into exploration, drilling, and production operations. Investors who are interested in dividends will be pleased to note that Chevron Corporation had an annual dividend of $4.76 per share

TOTAL SA was founded in 1924 as an integrated oil and gas company in over 130 countries around the world. Operating out of France, the company also trades on the NYSE under ticker symbol TOT. With a recent share price of $52.68 and outstanding shares over 2.67 billion, TOTAL SA has a market capitalization of $140.49 billion.

TOTAL SA is an oil stock that also delivers an annual dividend—most recently at $2.38 per share. Keep in mind that you cannot easily compare oil companies by stock price alone. Companies that offer shares of stock can manipulate price per share by issuing new shares in a stock split or reverse stock split or through a buyback program. While an oil company may seem to have a low price per share, it is important to look at other financial data to see if it is a good investment.

Some investors choose stocks that don’t offer dividends because they want to invest in companies that reinvest profit back into business activities—which can raise the price per share as the company grows. These growth stocks are a great way to receive tax benefits. In some cases, securities that are held over a year or two may be taxed at a lower long-term capital gains rate. Day traders and those who trade more frequently may have their profits taxed as ordinary income which can be much higher. Check out these best growth stocks for more information.

Based in Texas, this oil and natural gas company was founded in 1870. It has produced over $290 billion in annual sales. ExxonMobil operates around the world and trades on the NYSE with ticker symbol XOM. With a market cap of $291.78 billion, the company has over 4 billion shares outstanding at a price per share of $68.96. ExxonMobil earned over $290 billion in sales and a net income of $20.84 billion. Investors had an annual dividend of $3.48 per share.

One major downside of investing in oil companies is the potential for devastating accidents, such as with the Exxon Valdez oil tanker, which released millions of gallons of oil into the ocean and impacted thousands of miles of coastline. The environmental, health, and economic issues surrounding the oil and gas industry have placed increased pressure on the industry to focus on renewable fuel sources. Recently, companies have had to devalue their operations as worldwide oil production has exceeded demand and caused the price of crude oil to drop. Fluctuations in oil prices can greatly impact a company that operates on small margins with high overhead.

BP Public Limited Company (PLC) based out of London, U.K. is another major player in the petroleum refining industry with both upstream and downstream business segments. BP operates over 13 refineries in Russia and more than 2,960 service stations. Annual sales of $304 billion led to a net income of $9.38 billion. Founded in 1889, this stock trades on the NYSE under ticker symbol BP with a price per share of $36.56. With almost 3.4 billion shares outstanding, the company has a market capitalization of $124.14 billion. The company also offers a dividend of roughly $2.44 per share on the NYSE. BP also trades on the London Stock Exchange under the ticker BP at £462.95 per share, with 20.3 billion outstanding shares and a market cap of £93.99 billion.

Royal Dutch Shell PLC (Public Limited Company) is an energy company operating worldwide in the crude oil and natural gas industry. Founded in 1907 and located in the Netherlands, this company trades on the NYSE under ticker RDS.A and on the London Stock Exchange under RDS.B. Annual sales of $396.56 billion and a net income of $23.35 billion make the Royal Dutch Shell another major oil company. At a price per share of $57.40 an over 4 billion shares outstanding means a market cap of $231.84 billion. RDSA on the NYSA also pays out an annual dividend of $3.20 per share.

Based out of Dhahran in the Kingdom of Saudi Arabia, Saudi Aramco is one of the largest integrated oil and gas companies in the world with net income equivalent to $68.2 billion. Aramco just recently launched an Initial Public Offering or IPO to investors. After a rocky start and concerns from international investors, Aramco was able to draw significant investing from domestic investors and stock prices rose 10% to a daily cap. At this rate, Aramco may be the most valuable listed company in the world, with a value closing in on $2 trillion.

Aramco’s majority shareholder is the Kingdom of Saudi Arabia, which means this oil company is majority state-owned. Only 1.5% of shares were listed and domestic investors and citizens were given incentives and discounts to purchase these stocks. Foreign investors are limited, but it may be possible to secure stock in Aramco. Foreign investors were also taken aback by the recent drone and missile attacks on a major Aramco refinery, which delayed production temporarily.

The general consensus from the international finance community and Wall Street analysts seems to indicate that they did not value the company at the same level. Saudi Aramco has also promised a hefty dividend to investors to sweeten the deal. Although, as an investor in a foreign state-owned company trading oil and petroleum products, keep in mind that it is possible for your shares to be seized with little recourse.

Global economics and the monetary policy of various countries have greatly impacted the price of crude. Many oil gas companies have reserves of oil supply in the billions of oil-equivalent barrels. As the price of crude oil decreases due to increased supply and decreased demand, oil prices will fluctuate. This is why it is even more important to determine the best stocks to buy. Stocks paying dividends are an excellent way to set up free cash flow from companies with a proven track record. Some savvy investors with a dividend investing strategy receive enough income from dividend stocks to live comfortably.

Gazprom is a state-owned oil company based out of St. Petersburg Russia. With one of the largest worldwide gas pipelines, the Public Joint Stock Company (PJSC) Gazprom is a major supplier of oil and gas products to Russia and many European countries. Competition is brewing between state-owned Gazprom and domestic rival Rosneft, which has been poaching Gazprom contracts worldwide. Gazprom trades on Russian stock exchanges under the symbol GAZP with over 23 billion shares outstanding. Most recently Gazprom signed a $400 billion contract with China to deliver natural gas via pipeline.

Best Oil ETFs

Some investors choose to invest in a collection of securities rather than picking and choosing individual stocks. An exchange-traded fund (ETF) is a collection of stocks that are typically organized by industry or commodity. ETFs are similar to mutual funds except they are traded like stocks and have different tax consequences.

Investors typically cannot control which stocks are included in an ETF, but the overall performance is representative of the industry as a whole and can be less risky as a result. Because an investment is technically spread across multiple companies, if one fails, there is less of an impact on an individual investor. Managing risk in an investment portfolio is one of the major areas of focus for some investors. There are several crude oil ETFs, energy stock exchange-traded funds, and other ETFs for the global oil industry to consider. The U.S. Oil Fund trades at $12.43, and the iShares U.S. Oil & Gas Exploration and Production ETF trades at $52.75 a share. You can also expand to other ETFs that include oil and gas but focus on the broader energy sector, such as iShares Global Energy ETF.

Should You Invest in Oil?

Investing in oil stocks may be a good idea, depending on your investment strategy. Many oil and gas companies operate on subscription-based plans, which lead to steady performance indicators. Some oil companies focus on exploration and research and may reinvest profit rather than pay out a dividend to investors. Companies focused on growth or growth stocks can be another investing strategy focus. Check out these biggest stock gainers for inspiration.

Environmental concerns and declining crude oil prices have impacted the profitability of oil companies in recent years. Due to the advancement of renewable energy sources, many oil companies are straddling the energy industry with both oil and gas production and renewable energy sources. While oil companies may have to revise their financial projections, these energy stocks can still be solid investment choices. The key is to carefully analyze your portfolio and diversify your selections so that an issue with a particular industry will not wipe out your entire investment. Investing in an oil stock or oil ETF may be exactly what you need to diversify or even start producing steady dividend income.

Companies Mentioned in This Article

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Chevron (CVX)$110.08flatN/A72.90Buy$136.80
Total (TOT)$49.21flatN/A11.80Buy$58.83
Exxon Mobil (XOM)$60.65flatN/A18.05Hold$73.89
BP (BP)$36.00flatN/A30.00Buy$47.05
Royal Dutch Shell (RDS.A)$50.49flatN/A12.95Hold$64.33
Gazprom PAO (EDR) (OGZPY)$7.25flatN/AN/AHold$7.50
iShares U.S. Oil & Gas Exploration & Production ETF (IEO)$48.12flatN/AN/AN/AN/A
iShares Global Energy ETF (IXC)$28.29flat7.64%N/AN/AN/A

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