7 Oil Stocks to Buy Now That the OPEC+ Deal Is Done

The pandemic-induced collapse in energy demand resulted in a prolonged period of underperformance in oil stocks. Now the worst seems to be over, because the global economy is recovering sustainably. This view is reinforced by the fact that the global composite PMI for June 2021 was 56.6. Based on this indicator, economic activity appears to be better than pre-pandemic levels.

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Given the positive outlook for the global economy and oil, let's talk about seven oil stocks positioned to benefit from positive tailwinds.
Marathon Oil (NYSE: MRO)
Lundin Energy (OTCMKTS: LNDNF)
Transocean (NYSE: RIG)
Helmerich & Payne (NYSE: HP)
Chevron (NYSE: CVX)
Equinor (NYSE: EQNR)
Borr drilling (NYSE: BORR)
Given the surge in economic activity, it is not surprising that OPEC and its allies recently agreed to increase oil production, although the increase is likely to be gradual through 2020. The OPEC decision was complied with with an immediate correction of the Brent spot prices. Since then, however, oil prices have stabilized as increased supply goes hand-in-hand with increased global demand.
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7 Oil Stocks You Should Buy Now After The OPEC + Deal Is Made: Marathon Oil (MRO)
Marathon Oil (MRO) Loko on top of a mobile device.
Source: IgorGolovniov / Shutterstock.com
MRO stocks are another name among oil stocks that should be considered for investors who are bullish about the energy sector. For the current year, the MRO share has already risen by 77%. However, if there is a correction, new exposure may be considered as the stock is likely to remain in an uptrend.
The first reason to like Marathon is the fact that the company's assets are at an attractive breakeven point. The company's break-even point for the company's free cash flow is $ 35 per barrel of WTI. WTI oil is currently trading at $ 71.9 a barrel. Hence, there is a clear view of robust free cash flows in the quarters ahead.
For the first quarter of 2021, the company reported an FCF of $ 443 million. Even on a conservative basis, Marathon Oil is positioned for FCF in the $ 1.6 billion to $ 1.8 billion range. This will help with aggressive investments, dividends, and deleveraging.
It's also worth noting that the company posted a total cash buffer of $ 4.1 billion for the first quarter of 2021. Marathon already has an investment grade credit rating from three primary rating agencies. Funding investments is therefore unlikely.
The MRO share offers an annual dividend of 16 cents. However, if oil prices hold above $ 70 WTI, dividends are likely to rise. This is another factor in stock revaluation.
Lundin Energy (LNDNF)
Close up of oil pipelines at sunset
Source: Shutterstock
LNDNF stocks are among those oil stocks that seem to be flying under the radar. I believe the stock can be a long-term value creator.
A big reason to be optimistic about Lundin Energy is the company's 20% stake in the Johan Sverdrup field. The asset has gross reserves in the range of 2.2 billion to 3.2 billion barrels of oil equivalent.
The production in phase one is 535 Mb / d. Phase two will first deliver oil in the fourth quarter of 2022, with the field likely to have peak production of 720 Mbopd. The important thing is that the entire field has a break-even point of around $ 20 per barrel. Hence, this asset will be a multi-year cash flow generator for Lundin Energy.
Of course, Johan is not the only asset. The company has several assets in the Norwegian continental shelf that ensure production remains stable at around 200 mboepd. With a net debt to EBITDA ratio of 1.3, the company can continue to invest aggressively in the exploration pipeline.

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Additionally, Lundin Energy reported an FCF of $ 526 million for the first quarter of 2021. With an annualized FCF of $ 2.0 billion, the company has the flexibility to invest in growth projects. At the same time, the company has a dividend yield of 4.58% and dividends should hold up.
Overseas (RIG)
an image of an oil rig in the middle of the ocean on a cloudy day
Source: Shutterstock
The operators of offshore drilling rigs are also benefiting from rising oil prices. The RIG share is on an upward trend this year. It is likely that the positive momentum will continue.
Transocean has 39 swimmers with a 100% focus on ultra-deep water and harsh environments. In May 2021, the company reported an order backlog of $ 7.4 billion. This backlog offers clear sales and cash flow transparency. The important thing is that the company's backlog is largely investment grade. This ensures medium-term cash flows.
From a liquidity perspective, Transocean reported $ 1.2 billion in cash. The company also has $ 1.3 billion in undrawn assets. With the liquidity buffer, the company is fully financed for investments and debt repayment until 2022.
Another important point is that the company's fleet will have a higher daily rate if the oil stays solid. Therefore, an increase in the EBITDA margin seems likely in the next 12-24 months. When cash flows swell, the stock is likely to trend higher.
Transocean is also reportedly monitoring Seadrill's assets. If this news is true, the company's asset base is likely to expand in the quarters to come.
Helmerich & Payne (HP)
Stack of oil barrels
Source: Shutterstock
HP stock is an attractive choice among onshore drilling service providers. In addition to the potential for price increases, the HP share also offers a dividend yield of 3.35%. If the oil trend continues to rise, dividends will be sustainable and the company will have a strong balance sheet.
In terms of recovery, Helmerich & Payne closed the first quarter of 2021 with 94 active oil rigs. The number of active rigs rose to 109 by the end of the second quarter of 2021. In addition, the company had 127 active rigs as of April 2021.
With soaring oil prices, the company's drilling rigs were used more heavily. Helmerich & Payne currently has a total fleet of 281 drilling rigs. Should market conditions continue to improve, there is ample scope for revenue and cash flow to grow from here.
Fundamental strength is another reason to like Helmerich & Payne. Despite the challenges, the company has a low debt level of 14%. In addition, the company has a total liquidity buffer of $ 1.3 billion. With an investment grade rating, the financial risk is low.
On the flip side, Helmerich & Payne reported operating losses of $ 161 million for the second quarter of 2021. However, concerns about cash burn are offset by two factors.

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First, the company has strong fundamentals. Second, the improvement in the industry's outlook and increased rig utilization should ensure that operating losses will decrease in the quarters ahead.
Chevron (CVX)
Chevron (CVX) logo on blue sign in front of the skyscraper building
Source: Jeff Whyte / Shutterstock.com
With a dividend yield of 5.31%, CVX shares are among the top oil stocks to buy for income investors. Chevron stock is up 12% over the past 12 months. An upside breakout seems imminent as oil trends rise.
From an asset perspective, a low break-even price is the number one reason to like Chevron. In addition, the company had a reserve replacement rate of 99% between 2016 and 2020. Reserve replacement should remain robust as the company has a significant exploration pipeline.
The company expects investments of $ 14 billion in 2021. In addition, the company has budgeted annual capital expenditures of $ 15 billion (mid-range) over the next three years. Investments ensure stable production.
Internal cash flows should be sufficient to finance the investments. For the first quarter of 2021, Chevron reported operating cash flow of $ 4.1 billion.
With an annual cash flow of $ 16.4 billion, the company appears to be fully funded for the next several years. In addition, the company has a low net debt ratio of 22.5%, which leaves ample scope for growth.
Equinor (EQNR)
Illustrative leading article of the homepage of the EQUINOR (EQNR) website, with the EQUINOR logo visible on the screen. I
Source: II.studio / Shutterstock.com
Equinor is another company active on the Norwegian continental shelf with high quality assets. For the current year, the EQNR share has risen by 22%. However, another uptrend seems likely for this stock, which has a dividend yield of 2.99%.
A low break-even oil price is an important consideration and a major reason to be optimistic about Equinor. To put things in perspective, the company expects free cash flow to be $ 45 billion between 2021 and 2026.
This is based on an average oil price of $ 60 per barrel. Spot prices for Brent are already trading at USD 75 per barrel. If oil sustains current levels, Equinor is well positioned to deliver FCF of over $ 50 billion over the next five years.
Equinor also plans to use its oil and gas facility cash flows to transition to renewable energy. Over the next five years, the company expects to invest $ 23 billion in the construction of non-renewable facilities.
At the same time, stable production growth from oil and gas facilities is likely. The company has targeted production growth at a 2% CAGR for oil facilities in NCS by 2026.

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It's also important to note that a robust FCF would mean sustainable dividends and value creation through share buybacks. Given the low break-even oil price investments, dividends should stay as high as $ 60 per barrel of oil.
Borr drilling (BORR)
Miniature oil barrel and oil well figures on top of the pile of money
Source: Shutterstock
To conclude, I would like to discuss a penny stock of the oil sector that is attractive at the current level. The BORR share could be a multi-excavator - if the oil trend continues upwards.
Borr Drilling is an offshore drilling company with a modern oil rig fleet. The BORR share was an underperformer and lost 3.2% this year. One reason for the decline in shares was the dilution of the shares. However, the worst in relation to the downward movement of the BORR share appears to be over.
Borr Drilling currently has 13 active drilling rigs and another 10 are available for contracts. In addition, the company has 5 oil rigs under construction. If the decommissioned rigs are contracted, it will significantly increase the company's sales and EBITDA.
It's also worth noting that as oil price trends soar, the company has seen pull in contract activity. For the current year, the company has received new contracts worth $ 458 million. The important thing is that the average daily rate for new contracts is over $ 85,000. With the daily rate tending to increase, the company is positioned for healthy cash flows in the quarters to come.
From a financial perspective, the company ended the first quarter of 2021 with a cash position of $ 49 million. Recently, the company also announced a $ 40 million offer in the market. There is therefore a sufficient liquidity buffer for the next few quarters.
At the time of this writing, Faisal Humayun had positions (neither directly nor indirectly) in any of the securities mentioned in this article. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com's posting guidelines.
Faisal Humayun is a senior research analyst with 12 years of industry experience in credit research, equity research and financial modeling. Faisal has authored over 1,500 stock-specific articles with a focus on the technology, energy and raw materials sectors.
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