7 Top Oil Stocks for 2021

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The oil industry experienced significant setbacks in 2020 as the coronavirus pandemic brought the entire world to a standstill for months and essentially eliminated oil demand during that time. But with economies around the world opening back up, a surge of demand for petroleum products is bouncing back. 

The pandemic came as the oil industry was already undergoing significant transformations in order to figure out how their businesses will function in the wake of climate change. Additional hurdles came in mid-2021 when President Biden set a goal for half of all new cars sold in the United States in 2030 to be electric.

But the massive size of the oil and gas industry—of which the drilling sector is worth more than $2 trillion alone—means these energy stocks won’t disappear overnight. 

Below I’ve compiled a list of some of the top oil stocks so investors can decide whether or not these companies are the right investments as these companies shift their focus to adapt to climate change demands.

Now let’s take a closer look at some of the top oil stocks in the industry!

Best Oil Stocks to Buy Now

Here is a list of the best oil stocks to buy in 2021.

  1. Exxon Mobil Corporation 
  2. ConocoPhillips 
  3. Enbridge Inc. 
  4. Phillips 66 
  5. Chevron Corporation 
  6. PDC Energy, Inc.
  7. TotalEnergies SE 

Exxon Mobil Corporation (NYSE: XOM) 

  • ExxonMobil (NYSE:XOM)
  • Price: $58.82 (as of close Sep 29, 2021)
  • Market Cap: $253.506B

As the largest publicly traded oil company, Exxon Mobil hardly needs an introduction. The oil giant has one of the most recognizable names in the oil industry and, like some of its peers, its huge size has allowed the company to adapt to volatile crude oil prices. 

For example, the company says that 90% of its upstream development capital expenditures have a cost-of-supply of $35 per Brent Crude barrel, making it easier for the company to make money as oil prices fluctuate. 

Additionally, Exxon Mobil says it will maintain its dividends and fund capital expenditure investments between 2022 and 2025 if Brent Crude prices are between $45 to $50. 

And while the company’s size helps it maintain a strong position in the oil industry, Exxon Mobil is also investing in other, more environmentally-friendly technologies. The company has invested more than $10 billion in lower-emission technologies over the past two decades and will invest an additional $3 billion by 2025. 

And most recently, Exxon Mobil pledged in mid-2021 to reach net-zero carbon emissions by 2050. 

ConocoPhillips (NYSE: COP)  

  • ConocoPhillips (NYSE:COP)
  • Price: $67.77 (as of close Sep 29, 2021)
  • Market Cap: $91.111B

ConocoPhillips claims to be the world’s largest independent exploration and production (E&P) company based on its production and proved reserves. 

And it has a lot of reasons to boast of such claims. ConocoPhillips operates in more than 15 countries across the globe, utilizing more than 10,000 employees to explore and produce crude oil and natural gas. 

Because ConocoPhillips has so much production all across the world, it’s easier for the company to remain profitable even when the benchmark price of oil drops. That’s helped the company maintain a strong balance sheet in the past. 

Investors interested in buying the company’s shares should pay particularly close attention to the company’s Alaskan operations, which account for a significant amount of the company’s oil production.

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Enbridge Inc. (NYSE: ENB) 

  • Enbridge (NYSE:ENB)
  • Price: $39.8 (as of close Sep 29, 2021)
  • Market Cap: $80.631B

Enbridge is a large energy infrastructure company that operates oil and gas pipelines throughout the United States, along with natural gas storage, and even some wind farms. 

The company says it moves about 25% of all crude oil produced in North America and transports nearly 20% of all natural gas consumed in the United States. 

One of the things that makes Enbridge unique as an oil stock is that the company’s financial stability isn’t as tied to crude oil prices as many other oil stocks. That’s because Enbridge’s pipeline contracts involve fees that are set despite fluctuations in oil prices. 

That helped Enbridge weather a very tumultuous 2020 in which the company’s discounted cash flow per share of $4.67 exceeded the budget it set pre-COVID because of its “low-risk commercial model.” 

Enbridge is also focusing on its future by committing to reducing energy intensity by 35% by 2030 and reaching net-zero emissions by 2050.  

Phillips 66 (NYSE: PSX) 

  • Phillips 66 (NYSE:PSX)
  • Price: $70.03 (as of close Sep 29, 2021)
  • Market Cap: $30.642B

Phillips 66 is a large oil refining company in the United States and Europe. Like many other oil stocks, the company took a major hit in 2020 as demand for oil dropped off in the wake of the coronavirus pandemic.  

Before the pandemic, Phillips 66 enjoyed a strong position in the oil industry because of the company’s efficiencies. As the demand for oil starts to bounce back in 2021, Phillips 66’s management believes the company will do the same. 

On the company’s first-quarter 2021 earnings call, Phillips 66 CEO Greg Garland said that gasoline and diesel demand was recovering, which is “supporting higher refining margins and utilization rates.” 

Phillips 66 is also focusing its attention on the future of renewable fuels as well through the company’s Rodeo Renewed plant in San Francisco. The plant will produce 8,000 barrels of renewable diesel fuel per day by late 2021 and will reach 50,000 barrels per day in 2024. The company says it is the largest renewable fuels plant in the world

On top of all of this, many investors will also like the fact that Phillips 66 pays an impressive 4.8% dividend yield. 

Chevron Corporation (NYSE: CVX) 

  • Chevron (NYSE:CVX)
  • Price: $101.45 (as of close Sep 29, 2021)
  • Market Cap: $199.831B

Chevron has upstream and downstream operations and is one of the largest oil companies by market cap size. Chevron’s massive $197 billion size almost got a lot bigger after rumors swirled in early 2021 that the company was considering merging with rival Exxon. 

A merger deal never officially happened, but the news made some investors wonder about the future of the company. Whether or not a merger ever happens, Chevron’s management recently made clear that the company’s future is firmly in the oil and gas business. 

The company’s chief financial officer, Pierre Breber, said in mid-2021 that the company isn’t planning to transition to wind and solar energy like some of its competitors are. But that doesn’t mean that Chevron isn’t investing in some environmentally friendly efforts. The company says that it will spend $3 billion by 2028 to lower emissions.  

Chevron is beginning to bounce back from 2020’s slowdown and in the second quarter of 2021 management said that “Our free cash flow was the highest in two years due to solid operational and financial performance and lower capital spending.” 

Like some of its rivals, Chevron is a strong dividend play and currently pays a dividend yield of 5.2%. 

PDC Energy, Inc. (NASDAQ: PDCE) 

  • PDC Energy (NASDAQ:PDCE)
  • Price: $47.39 (as of close Sep 29, 2021)
  • Market Cap: $4.729B

PDC Energy is a Colorado-based independent exploration and production company that focuses on the “responsible development of natural resources.” 

The company produced 731 Million Barrels of Oil Equivalent (MMboe) at the end of 2020 and is much smaller than many other major energy companies on this list. But its share price gains over the past year have made PDC a standout oil stock among the crowd. 

PDC’s share price has skyrocketed more than 177% over the past 12 months (as of Aug. 2, 2021), outpacing the S&P 500 by more than 5X! 

The company says that it will spend between $500 million and $600 million in oil and gas investments in 2021 and generate $400 million in free cash flow during the year—with the goal of reaching $1 billion in free cash flow in the next few years.

TotalEnergies SE (NYSE: TTE)

  • TotalEnergies (NYSE:TTE)
  • Price: $47.93 (as of close Sep 29, 2021)
  • Market Cap: $125.586B

The French energy company TotalEnergies may be just the right balance for investors looking for an oil and gas company that also has its eye on a clean energy future. 

The company only generates a small amount of its energy production from electricity right now, but TotalEnergies has made a lot of investments in electric power and has set some big goals for clean energy in the coming years. 

The company recently said that it is developing a portfolio of renewable power generation with the goal of 15% to 20% of electricity sales by 2040. 

Not only is TotalEnergeries planning for a global shift to clean energy, while still benefiting from oil and gas right now, but investors will also appreciate the company’s very impressive 7% dividend yield. 

Oil ETFs: Invest in a Basket of Oil Stocks All at Once

If you don’t want to look through the stock market and select individual oil stocks to invest in, then buying an oil exchange-traded fund (ETF) may be a good avenue for you. An ETF allows you to invest in a lot of stocks all at once, which helps reduce the volatility that can come from buying just one, or a few, stocks. 

Because the oil industry is so large, there are several different oil ETFs for investors to choose from. If you’re interested in oil prices, then the United States Oil Fund ETF (USO) might be a good choice. Or, if oil production, exploration, and drilling are more up your alley, then the VanEck Vectors Oil Services ETF (OIH) may be best for you. 

And if you’re looking for a great way to tap Wall Street’s energy sector with a focus on oil and gas companies, then the Energy Select Sector SPDR ETF (XLE) should be your choice. 

Frequently Asked Questions

What is the best oil stock?

Out of the companies on this list, PDC Energy is the best-performing. PDC’s share price has skyrocketed about 160% over the past 12 months. The second-best performing oil stock on this list has been ConocoPhillips, which has gained 49% over the past 12 months. 

Is it a good time to invest in oil stocks?

The oil industry is undergoing major changes as companies and governments around the world are increasingly focusing their attention on renewable energy and reducing carbon emissions.

That doesn’t mean that some oil stocks won’t make good investments, but investors need to look for oil companies that are planning for an energy future that looks very different from how the sector has looked in the past. 

What is the best ETF for oil? 

Out of the oil ETFs on this list, United States Oil Fund (USO) has performed the best over the past 12 months, with gains of about 60%. 

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge. Millennial Money is part of The Motley Fool network. Millennial Money has a disclosure policy.

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