Best oil and gas stocks to buy in 2022
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This beginner’s guide gives you our top five oil and gas companies to invest in right now. Scroll down to find out which are the best stocks our team of experts have selected, along with a quick summary of each one.
What are the top oil and gas stocks to buy?
These are our picks for the best oil and gas shares around. You can find them, along with a link to their up to date share price, in the table below. Keep reading to learn about each one in more detail.
|#||Stock symbol||Company name||Trade now|
|2||XOM||Exxon Mobil Corporation|
|4||LNG||Cheniere Energy Inc|
1. BP plc (LON: BP)
BP is a British oil and gas company and part of a group of the seven largest in the world that are known collectively as ‘supermajors’ or ‘Big Oil’. BP is over a century old and its place at the top of this list is thanks to a major transition in its business model over recent years.
That shift is about trimming away some of its traditional oil assets in favour of investing in more sustainable, low-carbon energy sources. It wants to increase its spending on these projects to $5bn by 2030, a 10-fold increase on its 2020 figure.
Looking ahead, another encouraging part of BP’s plan is a plan to spend on share buybacks that will help to steadily increase its dividend. One of the biggest incentives to owning BP stock is a healthy dividend yield of more than 5% every year, and so the company favours investors with a long term outlook who want to see steady returns over time.
2. Exxon Mobil Corporation (NYSE: XOM)
Another of the ‘Big Oil’ clique, Exxon is one of the biggest companies in the world by revenue and it has the capacity to produce more than 6 million barrels of oil every day. Like BP, it has fallen on tougher times recently but is in the midst of a fightback.
Its place on this list is thanks to a significant recovery since the worst days of the coronavirus crisis. In part, this is because Exxon is another oil company that pays a substantial dividend. It’s a member of the Dividend Aristocrats club of companies that have raised their dividend for at least 25 consecutive years.
The Exxon share price often rises and falls in relation to the state of the broader oil market, as high commodity prices are good for its bottom line. But Exxon is more than that: it’s a big name that you can rely on to keep paying out a dividend, and it has even shown signs of moving towards more environmentally friendly business practices as well.
3. Chevron Corporation (NYSE: CVX)
The third member of Big Oil to make our list, Chevron is based in California and operates in 180 countries around the world. It’s one of Exxon’s biggest competitors and another company that has raised its dividend every year for more than a quarter of a century.
Although the coronavirus pandemic was a difficult time for Chevron, its cost-cutting measures then shaved 25% off its future obligations. As demand and prices rose with lockdowns easing, costs stayed low and it was able to announce bigger profits and dividend payouts to boot.
In terms of the future, more cash means Chevron could be in a position for a share buyback itself, which would raise the value of the remaining shares. It has also started making tentative steps towards alternative energy sources, investing in offshore wind and planning a path towards net-zero emissions targets.
4. Cheniere Energy, Inc (NYSEAMERICAN: LNG)
Cheniere is the biggest exporter of liquified natural gas (LNG) in the United States. LNG is a fossil fuel that’s cheaper and cleaner than many alternatives and the market for it has been growing rapidly, having more than tripled in size since 2000.
LNG is awkward to move around, so existing market leaders who control the pipelines have a significant advantage. Cheniere does deals that guarantee income well into the future, and the LNG boom has sent its revenues soaring. Having brought in just over $1bn in 2016, that figure was up to almost $10bn before the coronavirus hit.
Demand for LNG is expected to keep increasing. More than 350m tonnes of it was being shipped around the world in 2019 and that figure is expected to double again by 2040. Cheniere is already expanding its production capacity towards 50m tonnes a year, making it one of the major players in a growing market.
5. EOG Resources Inc (NYSE: EOG)
EOG Resources used to be known by a much more famous name, as it was originally Enron’s oil & gas division. Since its split from the disgraced mothership in 1999, it has become one of the biggest oil companies in the US.
The difference between EOG and some of the other companies on this list is that its business model focuses on limiting itself to only the highest value opportunities. It wants fewer wells, but ones that provide the best returns. It’s a strategy that has allowed it to increase its dividend by more than 30% and maximise returns for shareholders.
Looking ahead, it has identified more than a thousand ‘premium drilling locations’, more than 20 years worth of opportunities to continue on its merry way. That investment in the best quality land means it’s well set to keep producing top results for the foreseeable future.
Where to buy the best oil and gas shares
The best way to get shares in these companies right now is to use one of the trusted brokers below. The top stock brokers offer low fees and a simple interface that helps you find the shares you want. You can use our reviews as a guide to choosing one that suits you.
What is an oil and gas stock?
Any company that is involved in any stage of the extraction, transportation, or production process for oil or gas. That means there is quite a wide range of companies that fit the bill, from those who explore for new drilling opportunities all the way through to the ones that refine it into a finished product.
Are oil and gas shares a good investment?
It depends on the sort of investor you are. These stocks can be risky, because they are at the centre of the world economy and can be affected by things well outside of their control, like politics, recessions, and volatile commodity prices. While investing in companies that rely on fossil fuels is not for everyone.
Your reward for taking on these risks tends to be high dividend payouts, which can be an excellent way of growing wealth over time. While the share price volatility that these companies experience in response to oil prices can offer a discounted way into big, stable companies with lots of money and assets.
Overall, there are lots of opportunities in oil and gas stocks. The companies on this page are some of the best options out there, and you can sign up with a broker if you want to get started with any of them right now.
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