The economy of energy markets is changing rapidly. The shale revolution has helped the US to become one of the largest oil exporters in the world in the coming years. If that happens, it will dramatically change the dynamics of energy trading.
The International Energy Association estimates that US exports of total petroleum, including refined products such as gasoline and diesel, will reach about nine million barrels per day within five years, compared to just one million in 2012. If that forecast turns out to be It is correct, it will give the US a head start on Russia, and close to Saudi Arabia fall from its long-held position at the head of the list of exporters of crude and refined products in 2024.
These highly optimistic prospects offer a good opportunity for long-term bulls to find oil stocks that are well positioned to take advantage of the US energy dominance, especially those that are in growth mode and have large capacity to process oil products. With this context in mind, below are two top energy stocks that fit nicely into this strategy.
1. Devon Energy: sharp focus on growth
We love Oklahoma City-based Devon Energy Corp. (NYSE 🙂 stock to play the American oil strength. The company is transforming its corporate structure to become a pure slate producer and has ensured that surplus cash has given investors its top priority
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As part of his commitment to transform into a shale-driven company, Devon has spent more than $ 30 billion in assets in recent years. Last month it announced that it will complete this transformation by the end of this year after completing the last few transactions, including a full exit from Canadian oil sands.
"Devon is taking aggressive, meaningful and decisive steps to improve our operational and business cost structure," said Jeff Ritenour, executive vice president and chief financial officer in a statement. "The combination of selling more expensive assets and bringing new, cheaper production online, together with our commitment to an annual cost reduction of at least $ 780 million, is expected to increase the unit cost of cash in 2021 by more than 20% Reduce."
According to Devon estimates, the producer can increase his US oil production annually at middle age to generate positive cash flows if oil is traded at $ 46 a barrel and more. Devon plans to return that surplus money to shareholders through dividend increases and aggressive buy-back of own shares. The company gave a 50% increase in payouts to investors over the past two years, and raised its share buybacks to $ 5 billion. Once completed, this massive share buy-back program will reduce the company's outstanding shares by 30%.
Oil investors love this combination, where companies can be positive in cash flow and have a strong bias to reward their investors with dividends. Trading at $ 31.60, Devon shares have risen by nearly 40% this year. The company pays an annual dividend of $ 0.36 per share with an annual return of 1.14%
2. Exxon Mobil: a huge supply diversification
If you want diversification in the oil and gas room, we think that Exxon Mobil (NYSE 🙂 is your best choice. The company has an impressive scale in everything from drilling to refining to the American shale areas. And while the shares are unlikely to deliver huge benefits for investors, it remains a top stock to buy if you are an energy bull in the long run. The multinational oil and gas giant has also taken a forward-looking approach to improving its growth prospects, different from other major producers trying to stabilize their shares by cutting back on major spending
Exxon CEO, Darren Woods, believes that the oil industry needs a significant injection of new investments to meet the new challenges and has embarked on a $ 230 billion plan to breathe new life into the company , focused on drilling opportunities around the world
These include shale pits in West Texas, export facilities in Papua New Guinea, a series of major discoveries in the South American nation of Guyana, and developments in Mozambique and Brazil
Exxon weekly card
Trading at $ 80.34 at the end of yesterday, XOM shares won around 18% in 2019 and offer an annual dividend of $ 3.28 per share, with a return of more than 4%. With solid cash flows and a diversified asset portfolio, Exxon Mobil is well placed to take advantage of the US oil economy.
Bottom Line
There are a large number of short-term factors that can play a crucial role in determining the direction of the oil markets. But if your investment horizon is in the long run, you need to focus on those companies that are able to survive the worst economic downturn and still offer value in the long run. We think that both Devon and Exxon Mobil fit the bill.
