Despite the global push toward clean energy, fossil fuels have shown their impact on the economy in recent years. While renewable energy investments are significantly surpassing conventional energy investments, fossil fuels severely disrupted and confused the markets over the last few years with uncertainty. The Russia-Ukraine war sent the oil and gas prices flying, threw supply chains into disorder, caused the inflation rates to skyrocket, and forced the Fed into taking aggressive measures.
Fossil fuel’s ability to provide energy at any time of the day or year has made it the most important energy source of today. On the other hand, mainly due to high-interest rates, renewable energy investments slowed down in 2022. In 2023, the renewable energy stocks did not perform well. iShares Global Clean Energy ETF (ICLN), Invesco WilderHill Clean Energy ETF (PBW), and SPDR S&P Kensho Clean Power ETF (CNRG) have shown low double-digit year-to-date declines as of December 15.
Nevertheless, the latest Fed announcement has brought optimism to the market. The Fed projected three rate cuts in 2024, which sent the renewable energy stocks higher. Between December 12 and December 15, iShares Global Clean Energy ETF (ICLN) gained 10.15%, Invesco WilderHill Clean Energy ETF (PBW) gained over 12.5%, and SPDR S&P Kensho Clean Power ETF (CNRG) was nearly 9.6% higher. The long-term value investor Bill Ackman believes that the Fed will start to cut interest rates as soon as the first quarter of 2024.
After the Fed's latest meeting, solar energy’s gains were more prominent than the rest. Invesco Solar ETF (TAN) showed gains of 16.5% between December 12 and December 15. The rate cuts could be beneficial for companies like First Solar, Inc. (NASDAQ:FSLR) and Sunrun Inc. (NASDAQ:RUN).
The Energy Select Sector SPDR Fund (XLE) has been down 0.1% YTD as of December 15. Fossil fuels remained significantly tamer than last year, which can be seen in the earning reports of the companies involved. In 2023, Chevron Corporation (NYSE:CVX)’s revenue dropped by 6.6% year-over-year (YoY) in Q1, 29% in Q2, and nearly 19% in the third quarter. Exxon Mobil Corporation (NYSE:XOM)’s YoY revenue dropped 18.2% for the first nine months of 2023. The company raked in $318.25 billion in the first 9 months of 2022 and $260.23 billion in 2023.
Fossil fuel-based energy stocks went higher in the third quarter due to OPEC production cuts and the Middle East conflict. The energy sector was the best performer in the quarter while all others struggled.
While global governments are trying to speed up the transition toward renewable energy, there is still a problem with lower-income countries’ ability to adopt the change. Moreover, even if everything goes according to plan, fossil fuels are still going to be an important source of energy for more than a couple of decades, and we still don’t know when fossil fuels will hit their peak.
13 Most Promising Energy Stocks According to Analysts
A drilling rig surrounded by reserves of oil and natural gas.
Our Methodology
For this article, we made a list of stocks in the energy sector with market capitalization of $8 billion and above using the Yahoo Finance stock screener. Next, we checked the average analyst price targets of all the stocks and selected the 13 most promising energy stocks according to their average analyst price target upside as of December 15. The analyst price targets were taken from TipRanks.
Most Promising Energy Stocks According to Analysts
Devon Energy Corporation (NYSE:DVN) is an Oklahoma-based company that explores, develops, and produces oil, natural gas, and natural gas liquids (NGLs) in the U.S.
On December 11, Morgan Stanley upgraded Devon Energy Corporation (NYSE:DVN)’s stock to Overweight from Equal Weight and raised the price target to $52, up from $48. The firm mentioned its expectation of the company’s capital efficiency improving in 2024.
According to Insider Monkey’s database that tracks 910 elite hedge funds, hedge fund sentiment was quite positive toward Devon Energy Corporation (NYSE:DVN). The number of hedge funds with investments in the stock went up to 52 in Q3 from 45 in the previous quarter. With 3.044 million shares worth $145.209 million, Donald Yacktman’s Yacktman Asset Management was the most significant stakeholder in the company.
Devon Energy Corporation (NYSE:DVN) is one of the most promising energy stocks according to analysts, along with Cenovus Energy Inc. (NYSE:CVE), Halliburton Company (NYSE:HAL), and Schlumberger Limited (NYSE:SLB).
Exxon Mobil Corporation (NYSE:XOM) is one of the largest oil and gas companies and is headquartered in Texas.
On December 6, Exxon Mobil Corporation (NYSE:XOM)’s stock gained as it announced that it would increase its share repurchase program to $20 billion per year, up from $17.5 billion in 2023 starting from early next year through 2025. The company forecasted its production of 3.8 million boe/day in 2024, increasing to 4.2 million boe/day by 2027.
Exxon Mobil Corporation (NYSE:XOM) was covered by 19 Wall Street analysts over the last three months, and 14 maintained a Buy rating on the stock. As of the December 15 market close, the average price target of $129.00 represented an upside of 27.85%.
On November 16, it was reported that Exxon Mobil Corporation (NYSE:XOM) will invest up to $1 billion in a petrochemical project and carbon capture and storage facilities in Indonesia.
Ovintiv Inc. (NYSE:OVV) is a Canadian company that carries out the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids (NGLs).
On November 8, Ovintiv Inc. (NYSE:OVV) declared a quarterly dividend of $0.30, which is payable by December 29 to the shareholders of record on December 15. The stock’s dividend yield was 2.77% as of the December 15 market close.
On December 6, JPMorgan analyst Arun Jayaram upgraded Ovintiv Inc. (NYSE:OVV)’s stock to Overweight from Neutral and decreased the price target to $58 from $61.
Patient Capital Management commented on Ovintiv Inc. (NYSE:OVV) in its third quarter 2023 investor letter. Here is what it said:
“Ovintiv Inc. (NYSE:OVV) reversed its trend from the first half of the year climbing 25.6% in the quarter as commodity prices caught a bid. The company is benefiting from increases in production due to improved well productivity across its portfolio combined with a lower level of maintenance capex. 40% of oil and 50% of gas exposure is hedge for the next twelve months providing insulation from fluctuations in commodity prices. Ovintiv continues to allocate 50% of post-dividend free cash flow (FCF) to debt paydown, and 50% to shareholder returns via either dividends or buybacks.”
Permian Resources Corporation (NYSE:PR) is a Texas-based company that acquires, optimizes, and develops high-return oil and natural gas properties.
Out of the 12 Wall Street analysts that covered Permian Resources Corporation (NYSE:PR) over the last three months, 10 kept a Buy rating on the stock. As of the December 15 market close, the average price target of $17.42 had an upside of 30.61%.
Hedge fund sentiment was positive toward Permian Resources Corporation (NYSE:PR)’s stock in the third quarter, according to Insider Monkey’s database. In Q3, 35 funds were bullish on the stock at a combined stake value of $505.491 million, compared to 23 funds in the previous quarter at a total stake value of $288.472 million.
In the third quarter, Permian Resources Corporation (NYSE:PR) posted a GAAP EPS of $0.13 and revenue that jumped by 38.0% YoY to $758.5 million, which surpassed the analysts’ estimate by $13.27 million.
BP p.l.c. (NYSE:BP) is one of the oil and gas industry’s “supermajors”. It is an integrated oil and gas company headquartered in London, United Kingdom.
On December 6, BP p.l.c. (NYSE:BP) announced that it was in the final stages of completing the agreement for the restructuring of Trinidad and Tobago's Atlantic LNG facility. Under the agreement, the company’s stake will be increased to 45% from 40%. In 2022, the facility produced 3.4 million tons or 18% of the company’s global output.
On November 22, it was announced that BP p.l.c. (NYSE:BP) and Equinor ASA (NYSE:EQNR)’s joint Empire Wind offshore wind project received approval from the Biden-Harris administration. The farms in the project are estimated to have a total capacity of 2,076 MW of clean, renewable energy.
On November 30, BP p.l.c. (NYSE:BP) announced that it will acquire the remaining 50.03% stake in Lightsource BP for a base equity value of approximately $322 million. With full ownership of the solar and battery storage developer, the company plans to improve its renewable energy capacity.
Suncor Energy Inc. (NYSE:SU) is an integrated energy company that carries out operations like the development, production, and upgrading of oil sands, refinement of offshore oil and gas, and petroleum, and operates a retail distribution network.
On December 8, Suncor Energy Inc. (NYSE:SU)’s stock gained after upgrading its guidance for upstream production to 770K-810K bbl/day next year, 7% more than its 2023 production estimate. The company also raised capital spending to C$6.3 billion- C$6.5 billion, higher than its 2023 forecast of C$5.4 billion- C$5.8 billion.
On November 15, Suncor Energy Inc. (NYSE:SU) raised its quarterly dividend by 4.8% to CAD 0.545, payable by December 22 to the shareholders of record on December 1. At the time of the December 15 market close, the stock’s dividend yield was a hefty 5.17%.
On November 27, Suncor Energy Inc. (NYSE:SU) commented that it expects a growth in production owing to the resumption of its Terra Nova oil site off Newfoundland. The Terra Nova FPSO was taken out of commission in 2021 for maintenance to increase its life by 10 years.
Chesapeake Energy Corporation (NASDAQ:CHK) is an Oklahoma-based company that produces oil and natural gas. The company has operations in Eagle Ford Shale, Marcellus Shale, and the Haynesville Shale.
On November 22, Wells Fargo analyst Roger Read lowered the price target on Chesapeake Energy Corporation (NASDAQ:CHK)’s stock to $88 from $89 and maintained an Overweight rating.
In the third quarter, 45 hedge funds held a stake in Chesapeake Energy Corporation (NASDAQ:CHK)’s stock, compared to 44 funds in Q2. Howard Marks’ Oaktree Capital Management owned 7 million company shares worth nearly $603.616 million, making it the most prominent stakeholder in the company.
Coterra Energy Inc. (NYSE:CTRA) is a Texas-based company that develops, explores, and produces oil, natural gas, and natural gas liquids (NGLs).
Over the past three months, 14 Wall Street analysts covered Coterra Energy Inc. (NYSE:CTRA), and 11 kept a Buy rating on the stock. The average price target of $33.36 represented an upside of 32.75% as of the December 15 market close.
Cenovus Energy Inc. (NYSE:CVE), Halliburton Company (NYSE:HAL), and Schlumberger Limited (NYSE:SLB) are some of the most promising energy stocks according to analysts besides Coterra Energy Inc. (NYSE:CTRA).
Coterra Energy Inc. (NYSE:CTRA) was mentioned in Diamond Hill Capital’s third-quarter 2023 investor letter. Here is what it said:
“Other top contributors included Ciena Corporation, Coterra Energy and Webster Financial. Oil exploration and production company Coterra Energy Inc. (NYSE:CTRA) is capitalizing on good assets in the Permian Basin, and its Upper Marcellus holdings are showing promise as well — giving a boost to shares in the quarter.”
