Oil markets got spooked this week, right in time for Halloween. On Monday, World Bank economists warned that oil prices could peak close to $150 per barrel. That news, driven by geopolitical risk, could keep inflation running hot. We’d essentially see a repeat of last year’s energy price debacle. Some oil stocks would benefit from higher global energy prices. But the secondary effects and costs — transportation, bad publicity and distribution — serve to cap unlimited profit.
Still, breaking news on that front aside, some oil stocks are making big moves. Within the past few weeks, major companies announced shocking new developments that could mean big things for investors. But amid other geopolitical news and market volatility, much of that news went unnoticed.
These three oil stocks are making big moves to close out the year — better tap them while you can.
Exxon Mobil (XOM)
Earlier this month, oil giant Exxon Mobil (NYSE:XOM) announced a major acquisition that will more than double its current US-based oil claims. Exxon is acquiring Pioneer Natural Resources (NYSE:PDX), a smaller oil producer working in the black gold-rich Permian Basin region.
But the move is more than snatching up the smaller competition. The PDX acquisition represents a massive expansion opportunity for Exxon and double-digit profitability for shareholders. Pioneer holds more than 850,000 acres in the oil fields, while Exxon sits on “just” 570,000 acres. Better yet, Pioneer’s oil claims represent “the highest quality resource position in the basin,” according to experts. The new oil abundance will help Exxon reach its 2 million daily barrels by 2027 goal, ensuring substantial supply.
Best yet for shareholders, the deal came cheaply considering the potential payoffs. Exxon expects supply costs from the new acreage to fall in the mid-$30 per barrel range, meaning that unless a major supply shock brings too much oil to market cheaply, management expects double-digit returns based on current and projected market prices. For dividend investors, note that XOM’s current yield is a whopping 7.67% (including buybacks) — not bad considering its growth opportunities!
Occidental Petroleum (OXY)
Occidental Petroleum (NYSE:OXY) saw a massive cash inflow from an old friend this month. Warren Buffett, who’s been building an increasingly massive OXY position over recent months, made his first big buy since June. That pushes Buffett’s overall stake to more than 25%, exciting value investors and making those on the sidelines wonder whether the Oracle of Omaha knows something we don’t.
Better yet, for investors, Buffett said he isn’t actively seeking to control, manage or steer OXY. He likes the stock and is willing to maintain a passive investor position based on the company’s inherent strength and value.
That strength might lie in OXY’s ongoing direct air capture initiatives, which serve to reduce (or eliminate) carbon emissions. Just last month, OXY and Amazon (NASDAQ:AMZN) announced a decade-long deal to leverage OXY’s direct air capture facilities to offset their large footprint. The big deal could be the first of many for Buffett’s best oil stock, and investors balancing sustainability, value and ongoing fossil fuel reliance will find something to love in OXY stock.
Chevron (CVX)
Like Exxon, Chevron (NYSE:CVX) is making some big moves — but most consumers have heard of this new addition to CVX’s portfolio (unlike Pioneer, for uninitiated investors). Last week, CVX announced an all-stock purchase of exploration and production company Hess (NYSE:HES). For many Americans, Hess’ green trucks remain a visible sign of American oil industries, and the toy version of the iconic truck has long been a collector’s item and Christmas present staple. But the new deal represents a more enticing present for investors, just in time for the holiday season.
The purchase, like Exxon’s, expands Chevron’s oil production footprint. But crucially, Hess’ buyout opened Chevron’s access to the hot Guyanan oil fields, producing almost half a million barrels daily. Combining the resources and expertise of each, Chevron’s management expects to hit 1.2 million daily barrels by 2027 – not bad, considering the fairly low purchase price!
Like XOM, CVX’s total yield (including buybacks) beats Treasuries even at today’s elevated fixed-income investment rates. The yield currently sits over 8%, and the combined deal and hot yield make CVX a top oil stock to buy today.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
