Here we go again. Crude oil prices are once again marching higher after Saudi Arabia and Russia extended their voluntary production cuts to the end of this year. Brent crude oil, the international standard, is now trading above $90 a barrel. That’s up nearly 30% from this spring when crude prices were struggling to stay above $70 per barrel. The rise in crude prices is likely to mean more boom times for energy producers.
Coming off a year of record profits in 2022 when oil and natural gas prices spiked after Russian forces invaded Ukraine, oil and gas producers have had to watch as their earnings slumped for most of this year. Now, it looks like the downward is reversing, leading many analysts to once again talk up oil companies and urge investors to buy now before share prices vault higher. Here are the three best energy stocks to buy in September.
Chevron (CVX)
Along with its second-quarter results, U.S. oil major Chevron (NYSE:CVX) announced that company veteran Eimear Bonner will serve as the California-based company’s new chief financial officer (CFO). Current CFO Pierre Breber will retire in 2024 and Bonner, who has worked at Chevron for 24 years and currently serves as Chevron’s chief technology officer (CTO), will succeed him. The oil producer has also waived its mandatory retirement age for Chief Executive Officer (CEO) Mike Wirth.
The changes in the C-suite could be good for Chevron as the company emerges from a year of record profits in 2022. Like all oil majors around the world, Chevron has wrestled for much of this year with declining profits as the price of West Texas Intermediate (WTI) crude oil, the U.S. standard, fell from a peak of $122 a barrel in June 2022 to below $70 a barrel between April and June of this year. With WTI now back above $85, hope is emerging that Chevron could once again enjoy accelerating profits.
The company has a reputation for being good to its stockholders, announcing it issued a record $7.2 billion of distributions in Q2 of this year (dividends and stock buybacks combined). Despite the volatility in crude oil prices, Chevron still managed to produce a record 772,000 barrels of oil equivalent per day at its Permian Basin operations in Texas during Q2. CVX stock is down 4% year to date.
Shell (SHEL)
In posting its latest results, British oil major Shell (NYSE:SHEL) said it would repurchase $3 billion of its own stock over the next three months and raise its quarterly dividend to 33 cents a share. The company also announced it successfully reduced its debt load to $40.3 billion during Q2, down from $44.2 billion in this year’s first quarter. All of this was made possible by the record profits the company racked up last year when oil prices were above $100 a barrel for an extended period.
For this year’s second quarter, Shell reported a 56% decline in its profit to $5 billion due entirely to the decline in crude and natural gas prices. Prices for liquefied natural gas (LNG) fell to $11.75 per million British thermal units (mmBtu) from $33 in the year-earlier quarter. That had a big impact on Shell as the world’s biggest LNG trader. However, despite the downturn, Shell also continues to perform for its shareholders. That fact has helped SHEL stock remain buoyant. The company’s share price rose 13% this year and is near a 52-week high.
Occidental Petroleum (OXY)
Now for one of Warren Buffett’s favorite stocks, energy giant Occidental Petroleum (NYSE:OXY). The famed investor continues to buy more OXY stock every time an opportunity presents itself. In June of this year, Buffett bought an additional 2.1 million shares of Occidental Petroleum worth about $123 million. He now owns more than a quarter (25%) of the company, a stake worth $14.5 billion. Consistently praising the company’s management team, Buffett buys OXY stock each time its price drops below $60 a share.
Currently trading near $65 per share, OXY stock is up only about 6% this year, held back by the fall in crude oil prices. However, Occidental Petroleum has still managed to nearly double its capital spending this year to$1.5 billion, and it has raised its year-end production guidance by 20,000 barrels of oil and natural gas to 1.22 million barrels per day. Occidental also continues to put an emphasis on stock buybacks, which Buffett loves and undertakes for his own company, Berkshire Hathaway (NYSE:BRK-A/NYSE:BRK-B).
On the date of publication, Joel Baglole did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
