Monday’s stock market plunge spooked even the best oil and gas stocks. With fear of a recession the main reason for the market collapse, traders worried about the impact on the oil market.
The energy industry relies on strong demand and the higher prices that come with it to generate future growth. If the economy stalls, demand for oil and gas would also stall. Brent oil and West Texas Intermediate prices fell about 1% to their lowest levels since January.
However, since it does not yet appear that the sky is falling, both benchmarks have recovered, as has the stock market as a whole. S&P GSCI Crude Oil The index has risen about 3% since Monday and is 2% above Friday’s closing price.
However, with many industry players still down on the year, now is a great time to look for bargains. The following three companies are among the best oil and gas stocks to buy in August.
ExxonMobil (XOM)
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ExxonMobil (NYSE:XOM) is the largest integrated oil and gas company. It also makes huge profits. Second quarter results showed a 17% increase in profits to $9.2 billion, one of its highest ever. Earnings per share of $2.14 also significantly exceeded Wall Street estimates of $2.02.
The increase is due to higher production in the oil-rich Permian Basin. Exxon has established itself as the largest player in the region following its acquisition of Pioneer Natural Resources last year. The company merged the then market leader’s 850,000 net acres with Exxon’s 570,000 net acres.
Exxon aims to increase oil and gas production in the region by 50% by 2027. This was made possible by record production in the Permian and Guyana. Production rose to 570,000 barrels per day in the first quarter.
The results were slightly offset by mediocre natural gas prices and year-over-year declines in refining margins. As a leading producer with valuable upstream, midstream and downstream assets, Exxon also pays a 3.3% annual dividend. That’s why the energy giant is one of the best oil and gas stocks you can buy today.
EQT-Shares (EQT-Shares)
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EQT (NYSE:EQT) is the country’s largest natural gas producer, with over 1.1 million net acres on the other side of the trade. Despite its dominance, it does not enjoy as much investor attention as many other gas stocks. While natural gas prices have been a limiting factor for EQT’s business, its massive size allows the company to leverage economies of scale to reduce costs.
Now prices could move in that direction after recently rising 4%. State gas inventories are low and could trigger a buying spree on concerns about tight supplies. Macroeconomic and geopolitical concerns are also adding upward pressure. A far larger war in the Middle East could be brewing as Iran rattles its sabers against Israel, which could further affect regional supplies.
Despite the sweltering summer heat, summer is coming to an end and cold temperatures will return. If there is an early cold snap or winter temperatures are colder than usual, this will increase demand for natural gas.
EQT stock is trading at a significant discount. Shares are down 22% this year and trade at 8 times earnings estimates. With analysts forecasting 15% annual earnings growth for the natural gas giant over the next five years, this is a good time to buy EQT stock.
Partner for corporate products (EPD)
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Another market leader in this field is Partner for corporate products (NYSE:EPD), one of the largest midstream operators in the oil and gas industry. The company has more than 80,000 kilometers of pipeline and sufficient storage capacity for more than 300 million barrels of liquids.
Higher production from oil and gas companies such as Exxon and Chevron (NYSE:CVX) requires the use of its infrastructure. However, because Enterprise Products is based on long-term take-or-pay contracts, meaning that whether its customers use its capacity or buy the product, it gets paid, it is therefore a very stable source of income.
A word of caution regarding EPD stock is that the company is structured as a Master Limited Partnership (MLP). This creates complex tax considerations, so you may not want to own the stock in a normally tax-free individual retirement account because you could owe taxes. Enterprise Products Partners may not be for everyone, but for those who can afford it, it is potentially lucrative.
On the date of publication, Rich Duprey held a LONG position in XOM and CVX shares. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com’s publishing policies.
At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.
