Saudi Arabia’s energy minister has warned oil short-sellers will feel pain – now the nation has cut production by a million barrels a day

Oil prices have fallen significantly from their 2022 peak. Although this has prompted some traders to bet against the commodity, Saudi Energy Minister Prince Abdulaziz bin Salman has issued a stern warning to sellers discovered.

“I keep telling them they’re going to be ouch – they did in April,” he said at the Qatar Economic Forum in May.

And now OPEC+, which includes the Organization of the Petroleum Exporting Countries and its allies, has struck a deal to extend production cuts through 2024.

Saudi Arabia would also implement an additional voluntary production cut of 1 million barrels of oil per day from July.

At a press conference, the energy minister said the reduction could be extended and that he would do “whatever is necessary to bring stability to this market”.

If you want to bet on the return of oil prices, energy stocks could be worth a look. Here are three that Wall Street finds particularly appealing.

Don’t miss:

Exxon Mobil Corp. (NYSE: XOM)

With over $400 billion in market capitalization, Exxon Mobil is one of the largest players in the global oil and gas industry.

Stocks have seen huge rallies in 2021 and 2022, but appear to be taking a break in 2023: Year-to-date, Exxon stock is down just over 1%.

The company, however, continues to generate profits and cash flow.

According to the latest earnings report, Exxon made $11.4 billion in profit in the first quarter of 2023. It also generated $16.3 billion in operating cash flow and $11.4 billion in cash flow. available cash.

The company also returns money to investors. In the first quarter, Exxon paid $3.7 billion in dividends and spent $4.3 billion on stock buybacks.

At the current share price, the stock yields 3.4%.

Morgan Stanley analyst Devin McDermott has an overweight rating on Exxon and a price target of $122, implying a potential upside of 15%.

Devon Energy Corp. (NYSE:DVN)

Devon Energy is an independent oil and gas exploration and production company with operations focused on land in the United States.

In the first quarter of this year, the company’s oil production hit a record high of 320,000 barrels per day.

While oil prices have retreated from their highs, Devon continues to post impressive finances.

In the first quarter, the company’s operating cash flow totaled $1.7 billion. Free cash flow was $665 million.

“With this free cash flow generation, we were able to return more than $1 billion of capital to shareholders in 2023 through our differentiated dividend policy and the acceleration of our share buyback program,” Devon CEO Rick Muncrief said in a statement.

The company’s last quarterly dividend was 72 cents per share, which translates to a generous annual yield of 5.9%. However, note that Devon pays a fixed and variable dividend, so the amount may change from quarter to quarter. The most recent payout also included an 11 cents per share benefit from emergency disposal payments received during the quarter.

Stifel analyst Derrick Whitfield has a buy rating on Devon and a price target of $71, about 47% above the stock’s current position.

Occidental Petroleum Corp. (NYSE:OXY)

Occidental Petroleum shares more than doubled in 2022. The company benefited from high oil prices. At the same time, it caught more investor attention after Warren Buffett’s Berkshire Hathaway Inc. revealed a large stake last year.

Last month, it was reported that Berkshire had spent $275 million to buy an additional 4.66 million shares of Occidental, raising its stake in the company to 24.9%.

In the first quarter, the company produced 1.22 million barrels of oil equivalent per day, which exceeded the midpoint of its guidance range.

Buffett isn’t the only one who sees potential in the oil giant. Goldman Sachs analyst Neil Mehta has a buy rating on Occidental and a price target of $77. Given that the shares are currently trading at $59.75, the price target implies a potential upside of 47%.

Keep in mind that due to the volatile nature of commodity prices, even the largest oil companies can experience significant swings in their stock prices. If you appreciate the generous shareholder returns offered by the oil sector but are not a fan of such volatility, it might be worth exploring reliable dividend opportunities beyond the realm of the stock market.

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