Energy shares have pared their gains in September as oil prices have cooled down. The price of Brent crude is now below $94 per barrel. Yet in early March, it had surged over $130.Given the decline of oil prices, investors should identify a number of oil stocks to sell.
The global oil market is likely to continue to be turbulent throughout the year. Investors’ fears of a global economic decline and the ongoing Covid-19 lockdowns in China — the top importer of crude oil — could be weighing on petroleum prices. Oil traders are also factoring in the negative economic impact of higher interest rates.
On the other side of the equation are positive catalysts for oil prices. According to the recent short-term energy outlook of the U.S. Energy Information Administration (EIA), “the possibility of petroleum supply disruptions and slower-than-expected crude oil production growth continues to create the potential for higher oil prices.”
Put another way, investors should expect more choppiness in energy prices for the rest of 2022. The EIA expects the Brent spot price to average $98 per barrel in Q4 and $97 per barrel in 2023.
Therefore, some investors are looking for oil stocks to sell ahead of their potential declines . Here are three oil stocks to sell as crude prices plunge globally.
| CVX | Chevron | $160.19 |
| DVN | Devon Energy | $70.10 |
| OXY | Occidental Petroleum | $65.50 |
Chevron (CVX)
Chevron (NYSE:CVX) is the second-largest integrated energy company headquartered in the U.S. It owns exploration, production, and refining operations worldwide. In 2021, its operating revenue exceeded $150 billion.
The oil major reported its Q2 financial results on July 29. Its total revenue soared 83% YOY to $68.8 billion. CVX reported net earnings, excluding some items, of $11.4 billion, or $5.82 per diluted share, compared to $1.71 per share in Q2 of 2021. CVX generated free cash flow of $10.6 billion.
In light of Chevron’s solid balance sheet and the fact that its debt ratio is under 15%, the firm raised the top end of its annual share repurchase guidance range to $15 billion. Yet research suggests that in Q2 Chevron’s net income increased at a considerably slower rate than that of its peers.
CVX’s shares have returned over 38% since January, and it currently has a 3.5% dividend yield. Given the solid increase in CVX stock, there could be profit-taking in the name in the coming weeks.
Chevron is one of Warren Buffett’s favorite stocks. His huge holding company, Berkshire Hathaway (BRK-A, BRK-B), owns around 161.4 million shares of CVX, according to a recent 13F filing submitted to the U.S. Securities and Exchange Commission (SEC).
Therefore, although I expect short-term profit taking to pressure Chevron’s shares soon, long-term investors could consider buying CVX stock in the not-too-distant future. If CVX falls below $155, it would be even more suitable for long-term investors.
Devon Energy (DVN)
Our next stock is Devon Energy (NYSE:DVN), which seeks and produces oil and natural gas. Its operations are focused onshore in the U.S.
Devon reported its Q2 financial results on Aug. 1. DVN’s total revenue jumped 133% YOY to $5.6 billion Its net profit, excluding certain items, came in at $1.7 billion or $2.59 per share. DVN reported record free cash flow of $2.1 billion.
Meanwhile, management increased the firm’s full-year production guidance by 3% and raised its fixed-plus-variable dividend by 22% to a record high of $1.55 per share.
Recently, the company announced a partnership with energy names Williams (NYSE:WMB) and ONEOK (NYSE:OKE), as well as the venture capital firm Energy Innovation Capital and a non-profit organization, Tulsa Innovation Labs. The partners will seek “to transform America’s heartland into a hub for energy technology startups.” Wall Street will be paying attention to how this energy partnership evolves.
DVN stock is up more than 60% this year and has a dividend yield of 6.55%. As in the case of Chevron stock, investors who are expecting short-term profit taking to put pressure on Devon Energy could consider hitting the “sell” button on the shares.
A decline of DVN stock to $68 or lower would make the shares a better buy for long-term investors.
Occidental Petroleum (OXY)
Source: Pavel Kapysh / Shutterstock.com
The final energy name on our list is Occidental Petroleum (NYSE:OXY), which has operations in the U.S., Middle East, and North Africa. Recent metrics show that its market share in the U.S. is over 2%.
On Aug. 2, OXY posted its Q2 metrics. OXY’s total net sales soared 79% YOY to $10.7 billion. Its net income, excluding some items, came in at $3.2 billion, or $3.16 per share, compared to EPS of 32 cents in the same quarter.
The oil giant generated record free cash flow of $4.2 billion. Meanwhile, it repaid $4.8 billion of its debt, representing 19% of the total outstanding principal, and it repurchased around $1.1 billion of its own shares.
Berkshire Hathaway currently holds about a fourth of Occidental Petroleum’s shares. Despite receiving regulatory approval in August to buy up to 50% of all of OXY’s shares, Buffett’s team has chosen not to increase its stake in the firm so far. Meanwhile, on Sept. 12, Citigroup (NYSE:C) downgraded OXY stock from “buy” to “neutral”.
So far this year, OXY stock has generated a total return of over 130%, and its dividend yield is 0.78%. This month could be a good time for investors to lock in their profits by selling Occidental Petroleum’s shares. If the shares fall below $63, they would become a better buy for long-term investors.
On the date of publication, Tezcan Gecgil, Ph.D., did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.