Crude prices have skyrocketed this year due to the war with Iran. Brent, the global oil benchmark, has soared more than 60% to around $100 a barrel. Meanwhile, WTI, the primary U.S. oil benchmark, has rocketed 65% to about $95 a barrel.
Despite the current ceasefire and peace talks, oil prices could remain elevated for a while since it could be quite some time before the market returns to normal. With that in mind, here are three top energy stocks to buy this month to capitalize on the current market conditions.
Image source: Getty Images.
Chevron
Few energy companies were in a better position to cash in on this year’s surge in crude prices than Chevron (CVX 2.21%). The oil giant completed several major capital projects last year and closed its acquisition of Hess. As a result, Chevron initially expected to produce an additional $12.5 billion of free cash flow this year at $70 oil. It’s now on track to reap an even bigger windfall, given where crude prices are these days.
Chevron will return much of this windfall to shareholders. The oil company will likely repurchase shares at the high end of its $10 billion to $20 billion target range. It repurchased $12.1 billion of shares last year and bought $2.2 billion of Hess stock before the merger closed. Chevron has already increased its dividend (current yield of 3.8%), extending its growth streak to 39 consecutive years.
Today’s Change
(-2.21%) $-4.16
Current Price
$183.99
Key Data Points
Market Cap
$367B
Day’s Range
$177.74 – $184.30
52wk Range
$132.33 – $214.71
Volume
16M
Avg Vol
13M
Gross Margin
14.66%
Dividend Yield
3.76%
Meanwhile, Chevron is in a strong position to continue growing briskly even if oil prices cool off. It expects to grow its free cash flow at a more than 10% compound annual rate through 2030, assuming oil averages $70 a barrel. With its share price up only about 20% this year, Chevron could have a lot more upside, especially if crude prices remain elevated.
Energy Transfer
Energy Transfer (ET 0.05%) is a leading pipeline company. The master limited partnership (MLP) — an entity that sends a Schedule K-1 Federal tax form — operates crucial midstream infrastructure to support the flow of oil and gas. While it has minimal direct exposure to commodity prices (90% of its earnings come from fees), it benefits from higher volumes.
Today’s Change
(-0.05%) $-0.01
Current Price
$18.86
Key Data Points
Market Cap
$65B
Day’s Range
$18.34 – $18.90
52wk Range
$15.80 – $19.86
Volume
14M
Avg Vol
16M
Gross Margin
12.27%
Dividend Yield
7.03%
Energy Transfer’s terminals are crucial to supporting the U.S. Strategic Petroleum Reserve. The U.S. is tapping into that emergency stockpile this year to help offset some of the disruption caused by the war with Iran. That should benefit Energy Transfer as oil flows out of the SPR and again when the country refills its reserve.
While the SPR release will be a near-term catalyst for Energy Transfer’s earnings, expansion projects will fuel its growth long after the war ends. It’s investing at least $5 billion into growth capital projects this year and has commercially secured projects lined up through 2030. These projects support the MLP’s plans to grow its high-yielding distribution (7.1% current yield) by 3% to 5% per year.
Williams
While oil is the main storyline right now, natural gas is the bigger long-term catalyst in the energy market. Surging power demand to support AI data centers and advanced manufacturing facilities, as well as liquefied natural gas (LNG) exports, will fuel a more than 35% increase in U.S. gas demand over the next decade.
Today’s Change
(0.41%) $0.29
Current Price
$71.15
Key Data Points
Market Cap
$87B
Day’s Range
$69.33 – $71.54
52wk Range
$55.56 – $76.87
Volume
7.9M
Avg Vol
7.1M
Gross Margin
41.57%
Dividend Yield
2.85%
Williams (WMB +0.41%) is a leader in natural gas infrastructure. The company’s gas pipelines currently deliver about a third of the country’s gas demand. It’s investing heavily to expand its gas pipeline operations to capitalize on growing demand. Additionally, Williams has expanded its platform to include investments in LNG and power projects. It has already approved over $7 billion in gas-fired power solutions that should come online over the next few years.
These investments position Williams to deliver more than 10% compound annual earnings growth through 2030, well above its historical 5% to 7% annual growth target. This high-octane earnings growth will give Williams plenty of fuel to continue increasing its dividend (currently yielding 3%).
Well-positioned to thrive long after the war ends
The war with Iran has fueled a huge surge in crude prices this year. It will provide a near-term earnings boost for Chevron and Energy Transfer. Meanwhile, they have strong long-term growth catalysts unrelated to the war, as does Williams. Their robust future growth outlooks make them three of the best energy stocks to buy this April.
