As crude oil dances above the $85-per-barrel mark with a robust 7% jump since the beginning of March, and a staggering 22% rise in 2024, optimism in the energy sector is palpable. This upward trajectory is mirrored in the performance of the Energy Select Sector SPDR ETF (NYSEARCA:XLE), boasting a 16% increase since mid-February. With whispers circulating the market of a possible $100-per-barrel milestone for oil, the moment is rife with potential gains, prompting a closer look at the top oil and gas stocks to consider this April.
For investors entrenched in this sector, the surging oil prices are akin to a belated arrival of a long-awaited guest. The pilgrimage into oil and gas stocks, which commenced in 2023 with lofty expectations of a bullish oil market, saw a summer rally in 2023 fizzle out prematurely.
However, this time, the story might have a different ending. Unexpectedly bullish ISM Manufacturing Data graced March, while the robust job market vibes persisted, brushing off inflation fears and interest rates hovering over 5%. Though not record-breaking historically, these interest rates stand tall post near-zero levels sustained for close to 15 years.
The Federal Reserve is toying with the notion of trimming interest rates in 2024, paving the way for a deep dive into cyclical stocks. Even if the interest rate adjustments play out later than anticipated, seizing top oil and gas stocks in April before the prices spiral upwards becomes a strategic move.
Occidental Petroleum (OXY)
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Amidst the myriad “big oil” stocks dotting the horizon, choosing a standout candidate for the best oil and gas stocks this April could be challenging. Behemoths like ExxonMobil (NYSE:XOM) strutting above the $100 mark might strain some investors’ pockets. However, Occidental Petroleum (NYSE:OXY), currently oscillating around $67 per share, has punched through a resistance line and holds potential for further ascension.
OXY stock has found favor with Warren Buffett, whose Berkshire Hathaway (NYSE:BRK.B) commands a hefty 28% stake in the company. Buffet’s strategic entry point near $58 underscores his confidence in Occidental’s CEO, Vicki Hollub, who is orchestrating a realignment of the firm’s balance sheet in favor of shareholders. Noteworthy is Occidental’s assertive dividend increments after a 2020 slash.
Chevron (CVX)
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Chevron (NYSE:CVX) emerges as another prized asset in Buffet’s oil portfolio. CVX and OXY were Berkshire’s exclusive buys during the final quarter of 2023. Endorsed by Buffett for its robust track record of share repurchases, dividend growth, and healthy free cash flow, Chevron, however, trails behind XLE with a modest 7% uptick in 2024.
Uncertainty blankets CVX’s stride, with regulators’ stance on the proposed Hess (NYSE:HES) acquisition casting a shadow. The acquisition challenged by ExxonMobil adds yet another layer of unpredictability to the mix. Yet, with Hess shareholder approval in the bag, some clouds of doubt dissipate. Should the deal sail through, CVX stakeholders stand to benefit from a fortified portfolio, heightened production, and amplified free cash flow, culminating in escalated dividends and buyback actions.
Schlumberger (SLB)
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Schlumberger (NYSE:SLB) surfaces as a global player in oilfield services, primed to flourish as oil exploration gains momentum. With oil nudging close to $90, expedited drilling activities seem inevitable, especially in an election year. Schlumberger’s standing as the globe’s premier offshore drilling entity becomes pivotal as firms gravitate towards this greener alternative amid plans for heightened oil production, with Saudi Arabia leading the way despite OPEC’s output cut commitments.
Trading at a forward earnings multiple of just 15x, Schlumberger anticipates a robust 18% earnings surge in 2024. Wall Street whispers a consensus price target of $68.08 per SLB share, translating to a 25% jump from April 3, 2024’s market value. Moreover, 25 out of 33 analysts shower SLB with a Strong Buy rating, fueling further optimism in the stock.
Chris Markoch held a LONG stake in CVX during the composition of this article. The viewpoints expressed are solely the author’s and comply with InvestorPlace.com Publishing Guidelines.
