Bank of America recently made a bold prediction. The banking giant believes that an imbalance between supply and demand in the oil market will push oil prices up to $ 100 a barrel by next year. He is not alone in his judgment, with major oil executives also believing that oil prices could surpass $ 100 a barrel as demand rises against a backdrop of declining supplies as the global economy recovers.
This scenario will undoubtedly be a boon for the oil companies. With this in mind, the most attractive oil companies, according to energy suppliers, are Occidental Petroleum (NYSE: OXY), Marathon Oil (NYSE: MRO) and Devon Energy (NYSE: DVN).
This scenario will undoubtedly be a boon for the oil companies. With this in mind, the most attractive oil companies, according to energy suppliers, are Occidental Petroleum (NYSE: OXY), Marathon Oil (NYSE: MRO) and Devon Energy (NYSE: DVN).
Some consider Occidental Petroleum valuable with the ability to buy and hold shares for the long term, given the damage done during the 2020 oil crisis.
And yet, as oil recovers, and some speculate that $ 100 a barrel is a real opportunity, more aggressive investors looking for a way to win back this commodity move may still be interested.
And yet, as oil recovers, and some speculate that $ 100 a barrel is a real opportunity, more aggressive investors looking for a way to win back this commodity move may still be interested.
Bank of America awaits oil for $ 100
Marathon Oil: Commodity prices not only determine Marathon Oil's revenues and cash flows, but they are also the sole determinant of the company's capital expenditure and capital allocation plans, so the continued rally in oil prices is great news for Marathon Oil.
This year, Marathon expects to receive a free cash flow (FCF) of $ 1.1 billion at an average WTI oil price of $ 50 per barrel. At $ 60 a barrel, the company could get $ 1.6 billion in free cash flow!
With the price of oil already exceeding $ 70 a barrel, Marathon should be able to generate even higher cash flows and use the additional cash to pay off more debt and reward shareholders with higher returns. As of the end of the first quarter, Marathon had already paid off $ 500 million in debt and planned to cut another $ 500 million in debt this year. In the first quarter, the company also increased its quarterly dividend by 33%.
With the price of oil already exceeding $ 70 a barrel, Marathon should be able to generate even higher cash flows and use the additional cash to pay off more debt and reward shareholders with higher returns. As of the end of the first quarter, Marathon had already paid off $ 500 million in debt and planned to cut another $ 500 million in debt this year. In the first quarter, the company also increased its quarterly dividend by 33%.
Devon Energy: Investors in Devon Energy receive immediate dividends as oil prices rise through a unique variable dividend system. The oil and gas producer plans to pay investors up to half of the excess cash it generates each quarter in variable dividends. As oil prices rise, so do payments.
As oil prices continue to rise - they are now close to $ 75 a barrel - Devon's variable dividend payout should rise even more. If oil does rise to triple figures again, Devon could pay a monstrous dividend. This potential windfall in cash payments makes Devon an oil stock that investors won't want to miss as oil prices soar towards $ 100.
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