As we enter 2023, oil prices will be in the mid-70s, roughly the same level as in early 2022. Crude oil peaked in her $120 range after Russia invaded Ukraine, but then retreated on fears the global economy would slow.
No one knows what will happen to oil prices this year. Some analysts expect oil prices to return to triple digits, but some believe oil prices could fall if there is a recession. This uncertainty can make it difficult to decide where to invest in the energy sector.
But some energy stocks could do well no matter what happens to oil prices this year. Among Fool.com contributors, he stands out for his resilience in oil markets of all kinds: Enterprise Product Partner (EPD 1.50%), embridge (ENB 2.30%)When chevron (CVX 0.75%).
I want to move, I want to move
ruben greg brewer (Enterprise Product Partner): Earnings in the upstream (oil production) and downstream (chemical and refining) segments of the energy sector are greatly affected by highly volatile oil and natural gas prices. Connectors between two intermediates (pipelines) — not many. A location operated by Enterprise Products Partners, it houses a vast collection of virtually irreplaceable North American pipeline, storage, processing and transportation assets.
The underlying story here is that the enterprise charges for the use of its assets. The price of what flows through that system can go up and down. We won’t materially change what the Master Limited Partnership claims, which makes the company’s cash flow very stable over the long term and at its current share price he’s supported by a high dividend yield of 7.8%. . To be fair, this distribution could account for the bulk of an investor’s return here. But given this high number, it probably won’t matter to most income-focused investors.
In addition to the lure of these big quarterly checks, Enterprise has increased its distribution for 24 consecutive years. And that distributable cash flow covered his generous payout of 1.8x in the third quarter of 2022. This suggests that the distribution is not only secure but has room to continue to grow. Capital investment supports that belief.
Unaffected by oil price fluctuations
Matt Dilaro (Embridge): embridge is vast pipeline A network that transports 30% of all oil produced in North America. However, we don’t care about the price of the oil flowing through our pipes, because we pay a fixed fee for the capacity of the system, either on a government-regulated tariff structure or on a long-term fixed-price contract. This business model allows us to generate stable cash flow without being influenced by crude oil prices.
This pays out an attractive dividend of 6.7% at the current share price and provides capital to invest in expansion projects. The company has a backlog of multi-billion dollar capital projects under construction, a clear indication of future growth. Management expects Enbridge’s cash flow per share to grow at an annual rate of 5% to 7% through at least 2024. Meanwhile, the list of projects that drive growth beyond that period is growing. From natural gas pipelines to offshore wind farms in Europe. The company also has a top-tier financial profile that includes investment grade credit with leverage on the lower end of its target range, making it easier to fund growth.
Enbridge’s increased cash flow should allow the company to continue increasing its dividend. The company recently gave investors his 3.2% price hike for 2023. Dividend increased for 28 consecutive yearsThis combination of income and growth should enable Enbridge to generate attractive total returns for investors in any oil market environment.
Commitment to Shareholders
Neha Chamaria (chevron): When considering oil prices in 2023, there are two options. If you fear that prices will fall, you can play it safe by investing in middle class companies. Or you can look at upstream oil stocks that thrive when oil prices rise but prove relatively more resilient than their peers when oil prices fall. I think it belongs in his second category.
Chevron is expected to release fourth-quarter and full-year numbers later this month, and is expected to report record cash flow for 2022. If oil prices rise further in 2023, Chevron should be able to make the most of it by increasing production.
But even when oil prices fall, Chevron can remain financially strong while still rewarding shareholders with regular dividends thanks to all the cash it has accumulated and the debt it has paid off in recent quarters. must. The third quarter, for example, was his sixth straight quarter in which Chevron lowered debt levels.
In fact, in the coming weeks, Chevron will announce its 36th consecutive annual dividend increase. This should help the stock support his 3%+ yield. On its third-quarter earnings call, CEO Mike Wirth described the company as “well-positioned to deliver shareholder value in any environment,” and the steadily increasing payouts certainly support that. Contributing.If legendary investor Warren Buffett keeps multiplying Berkshire Hathaway‘s Chevron stock could be another source of this oil stock boost in 2023.
Matthew DiLallo has held positions at Berkshire Hathaway, Enbridge, and Enterprise Products Partners. Neha Chamaria has no positions in any of the mentioned stocks. Reuben Gregg Brewer has a position at Enbridge. The Motley Fool invests in and recommends Berkshire Hathaway and Enbridge. The Motley Fool recommends Enterprise Products Partners and recommends the following options: The Motley Fool’s U.S. headquarters has a disclosure policy.