After pulling back to start the week, crude oil is back on the rise again today. In fact, since Russia and Saudi Arabia announced they would extend voluntary supply cuts through the end of the year, oil prices have ramped up considerably - and a recent statement by the Secretary General of OPEC+ indicates prices are unlikely to come down significantly anytime soon.
Against this backdrop, crude oil for November delivery (CLX23) has pulled back from its newly set 13-month high, but the contract is still sitting on a gain of 6.7% since the start of September.
With oil prices and bond yields both rising while equities stumble to start October, it's not a bad idea to bolster your portfolio with some best-in-class energy stocks - companies with strong fundamentals, solid upside potential, and healthy dividend yields.
Here's a look at three top energy stocks to consider right now - including one standout natural gas name.
Diamondback Energy
Founded in 2007, Diamondback Energy (FANG) is one of the largest independent oil and natural gas companies in the United States. The company is engaged in the acquisition, development, exploration, and exploitation of unconventional, onshore oil and natural gas reserves, primarily in the Permian Basin. With a current market cap of $26.85 billion, Diamondback offers shareholders a healthy dividend yield of 4.58%.
Diamondback Energy stock is up 13% on a YTD basis, comfortably outperforming the 3.6% gain in the Energy Select Sector SPDR Fund (XLE) in 2023.
Like many other energy companies, Diamondback's results for the second quarter were mixed, as softer commodity prices during the first half of the year pressured results. The company reported revenues of $1.92 billion for the quarter ended June 30, down 30.7% from the prior year. Meanwhile, EPS slipped by almost 48% from the previous year to $3.68, and missed the consensus estimate.
Encouragingly, the company's production activities remained strong, with growth reported in the key segments of oil, natural gas, and natural gas liquids. In fact, daily oil volumes rose 19% to 263,143 barrels per day.
More recently, Diamondback strengthened its water infrastructure in the Midland Basin by forming a joint venture with Five Point Energy. The joint venture has created the largest independent water infrastructure platform in the Midland Basin, with 800 miles of pipelines for gathering, transport, disposal, and reuse. FANG popped 2.5% in one session on news of the partnership.
Analysts remain bullish about Diamondback stock, with a consensus “Strong Buy” rating and a mean target price of $174.78 - indicating an upside potential of about 16.8% from current levels. Out of 22 analysts covering the stock, 19 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, 1 has a “Hold” rating, and 1 has a “Moderate Sell” rating.
Cheniere Energy
Founded in 1996, Cheniere Energy (LNG) is the largest LNG producer and exporter in the United States. Cheniere's LNG export facilities liquefy natural gas from the United States and then ship it to customers around the world. Cheniere owns and operates two LNG export facilities in Louisiana: Sabine Pass LNG and Corpus Christi LNG. The company also has a third LNG export facility under construction in Texas: Calcasieu Pass LNG. The company currently commands a market cap of roughly $39.10 billion, and has a dividend yield of 0.97%.
Cheniere Energy stock has gained 8.92% on a YTD basis, outperforming the XLE by a wide margin.
Cheniere Energy reported revenues of $4.1 billion for the quarter ended June 30, down 48.8% from the year-ago period. On the other hand, EPS of $5.61 was up 93.4% from the prior year, and surpassed the consensus estimate of $2.81. In fact, the company's EPS has surpassed expectations in four out of the past five quarters.
Volumes loaded by the company were down 5% annually, but strong demand in Europe (up 30%) and expected demand growth in Asia - led by China and India - should be beneficial for Cheniere, as it remains well positioned to cater to this rising demand.
Moreover, the company recently signed an agreement with BASF wherein the latter will purchase up to about 0.8 million tonnes per annum of LNG starting from mid-2026 till the end of the deal in 2043, providing long-term revenue visibility.
Analysts are upbeat about Cheniere Energy stock, assigning it a “Strong Buy” rating with a mean target price of $197.47. This suggests expected upside potential of roughly 21.9% from current levels. Out of 15 analysts covering the stock, 13 have a “Strong Buy” rating and 2 have a “Moderate Buy” rating.
Northern Oil and Gas
We close our list with Minnesota-headquartered independent oil and gas producer, Northern Oil and Gas (NOG). Northern operates in the Williston Basin, which spans North Dakota, Montana, South Dakota, and Canada, and is home to a number of major oil and gas fields. The company's market cap currently stands at $3.59 billion, and it offers an attractive dividend yield of 3.60%.
Shares of the company are up 30.3% on a YTD basis, outperforming not only the XLE, but the broader equities market, as well.
Despite lower commodity prices in the first half of the year, Northern actually reported higher revenues for the second quarter. The company reported quarterly revenues of $476.5 million, up about 8% from the previous year. EPS fell 13.4% to $1.49, but managed to surpass the consensus estimate of $1.36. Notably, the company's EPS has beaten expectations in four out of the past five quarters.
Production levels also increased, as the company reported an average daily production of 90,878 boe - up 25% from the year-ago period. Further, the company's recently completed acquisition of the Northern Delaware Basin assets from Novo Oil & Gas is expected to further aid its production levels.
Overall, analysts have assigned a “Strong Buy” rating on NOG, with a mean target price of $51.27 - which denotes an upside potential of roughly 32% from current levels. Out of 11 analysts covering the stock, 9 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 1 has a “Hold” rating.
