Evaluating Energy Stocks: Chevron vs. Occidental Petroleum in 2025
The economy’s strength is under examination, and uncertainties surround potential changes in U.S. trade policies. Consequently, oil and gas prices are experiencing fluctuations at the beginning of 2025. In this environment, investors are evaluating which energy stocks might withstand current challenges.
One noteworthy contender is Chevron (NYSE: CVX), renowned for its solid 4.9% dividend yield. Alternatively, Occidental Petroleum (NYSE: OXY) offers an attractive valuation that could signal enhanced returns in the near future.
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Let’s analyze which Stock currently presents a better investment opportunity.
Image source: Getty Images.
Chevron: Strength Through Diversification
Despite the wider market’s volatility and challenges in the energy sector, Chevron’s Stock has exhibited resilience, down just 5% year-to-date. This stability reflects the company’s global diversification and robust fundamentals, both of which enhance its appeal as a long-term investment. Chevron effectively utilizes its extensive global presence and diverse portfolio in upstream, downstream, and chemicals manufacturing.
Currently, Chevron is expanding its operations in Kazakhstan via the Tengizchevroil (TCO) oilfield, which has already begun producing oil this year and is projected to increase output. In addition, the company is launching several new projects in the Gulf of Mexico and capitalizing on its assets in the Permian Basin.
Looking forward, Chevron aims for an annual production growth rate between 6% and 8% in 2025, followed by 3% to 6% in 2026. The company is also focused on achieving structural efficiencies, projecting an additional free cash flow exceeding $9 billion above 2024’s $15 billion haul, assuming a baseline Brent crude oil price of $60 per barrel.
This robust outlook for free cash flow underpins the sustainability of Chevron’s quarterly dividend of $1.71 per share, currently yielding 4.9%. Furthermore, Chevron’s ongoing stock buyback program is set to bolster shareholder returns. For long-term investors, Chevron appears to be a worthy addition to a diversified portfolio.
CVX Dividend Yield data by YCharts
Occidental Petroleum: Higher Upside Potential
Although Occidental Petroleum has a market capitalization of $36 billion, compared to Chevron’s $239 billion valuation, it distinguishes itself in onshore oil and gas production by efficiently developing complex and unconventional reserves.
Occidental boasts significant operations in the Permian Basin, one of the U.S’s most lucrative oil-producing regions, supplemented by extensive assets in the Rockies and the Gulf of Mexico. The company’s diverse portfolio also includes chemicals and midstream infrastructure, along with certain international operations. Noteworthy is Occidental’s initiative to complete its Stratos industrial-scale direct air carbon recapture facility, underscoring its leading role in this emerging market.
This year, despite record U.S. energy production and healthy profitability, Occidental’s stock price has dipped 22%, likely due to a robust investment spend plan. This recent dip may provide an attractive entry point for investors to acquire shares at a discounted rate. Currently, Occidental’s stock trades at under 12 times its projected 2025 earnings per share (EPS) and around 8 times its free cash flow over the past year, both indicators showing more favorable valuations than Chevron.
For those with a bullish outlook on the energy sector, Occidental Petroleum could represent greater upside potential should oil and gas prices recover. Investors interested in diversifying their portfolios might find Occidental worth considering.
CVX PE Ratio (Forward) data by YCharts
Decision Time: Chevron Leads the Way
In the current economic climate, Chevron may represent the superior energy Stock. Given the risk of continuing volatility in oil and gas prices, Chevron’s diverse asset portfolio and stronger fundamentals could offer a more reliable investment option, along with steady dividend income.
Should You Invest $1,000 in Chevron Today?
Before deciding to invest in Chevron, consider this:
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Dan Victor has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool also recommends Occidental Petroleum and has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
