3 Hot Energy Stocks With More in the Tank

Lately you could throw a dart at a group of energy stocks and probably come out a winner. 

A sector that was hit hard during the early months of the pandemic has turned into the hottest thing in the equity market. After recovering 35% last year, global energy stocks have caught fire again in 2022 due favorable supply and demand dynamics that have been accelerated by the Russia-Ukraine war. 

With WTI crude prices trading above $100 for the first time since 2014, oil producers and service providers are suddenly wishing there were more than 24 hours in a day to capitalize on the current landscape. Although a surge in China’s coronavirus cases now threatens the demand side of the equation, elevated oil prices are likely to be a boon to oil companies for some time.

Upstream, midstream, and downstream oil and gas businesses are seeing investors stream into their stocks at breakneck paces this month. Is it too late to join the party?

A post-exuberance correction appears inevitable for the energy sector, especially if Russia-Ukraine tensions ease in the days ahead. If this occurs, it could present an opportunity for investors to get in on an oil industry poised to deliver slick results in 2022. Here are three names that still appear to have good upside.

What is a Good Oil Stock to Buy? 

EOG Resources, Inc. (NYSE: EOG) is one of the country’s largest independent oil and gas producers. A leading player in both the Bakken and Eagle Ford shale regions, EOG has additional assets in the U.K. and Trinidad. 

Higher realized crude and natural gas prices along with increased production led to EPS of $8.60 last year, nearly 6x the company’s profits in 2020. In the fourth quarter, EOG’s average oil price was $78.29. It has only gone higher, setting the stage for a tremendous start to the new year. 

The low-cost driller is forecast to grow its bottom line by 47% this year, an estimate that could go up if oil prices continue to trend higher. This means that at 9x forward earnings, EOG remains one of the best values in the E&P space. A $3.00 per share dividend with hike potential isn’t too shabby either. 

Is Williams Companies Stock a Buy?

The Williams Cos., Inc. (NYSE: WMB) is one of the best midstream companies in the business. Its network of over 33,000 miles of oil and gas pipelines transport energy resources to and from the Northwest, Eastern Seaboard, and everywhere in between.

Since its primary focus is natural gas and natural gas liquids (NGLs), Williams Companies is a play on North American gas infrastructure. Natural gas prices have also trended higher during the economic recovery and are receiving a boost from the Russia-Ukraine crisis. Russia supplies almost half of Europe’s natural gas imports so fears that Putin will cut off this supply are keeping gas prices elevated. 

Putting the near-term geopolitics aside, Williams Companies is expected to benefit from growing long-term demand for relatively cheap U.S. natural gas. Wall Street is projecting 15% earnings growth this year and is mostly bullish on the stock. Despite its 22% year-to-date advance, ten of the Street's last 11 opinions have been buys. Still $30 away from its 2015 record high, Williams Companies’ upside could be as lengthy as its pipelines. 

Will Pioneer Natural Resources Stock Go Up?

Back to the E&P group, Pioneer Natural Resources Co. (NYSE: PXD) recently eclipsed its all-time high set in July 2014 but appears to have room to run. This week Wells Fargo became the latest sell-side firm to reiterate its buy rating and gave the stock a $276 target, which implies 20% upside. 

Pioneer is one of the leading players in the Permian Basin where it has extensive exploration and production facilities for oil, gas and NGLs. Higher prices for all of the above commodities drove a 119% surge in revenue in 2021 forming a base analysts predict the company can grow from with prices and production on the rise.

A unique dividend structure is more reason for investors to like Pioneer. On top of a base dividend, the company recently instituted a variable dividend tied to ongoing performance. 

This week shareholders received a $3.00 variable dividend payment to compliment a $0.78 dividend that was increased 26% from the previous dividend. A generous dividend policy, new $4 billion repurchase program, and forward P/E under 10 point to a shareholder friendly energy name with plenty of gas in the tank.