As Russia moves into Ukraine, here are the oil stocks that might benefit the most

In the modern era of undeclared wars, the start of any military action is bound to be confusing. Russia’s “peace-keeping” military move into eastern Ukraine, following Russian President Vladimir Putin’s recognition of two regions that have declared independence, puts the world energy market in flux.

The stage was already set for higher oil prices with accelerating demand. Further supply uncertainty in the face of economic sanctions against Russia and a possible disruption of the flow of natural gas to western European countries from Russia added to it.

Much has changed in a week, with a combination of stock-price action and analysts’ target changes meaning the analysts see upside of at least 30% for nine heavily favored stocks, when a week earlier that could be said for only five stocks.

In order to take a broad look at oil stocks, we began with the holdings of these three exchange traded funds:

  • The Energy Select Sector SPDR ETF XLE holds the 21 stocks in the energy sector of the S&P 500 SPX.  The sector has risen 21.8% this year through Feb. 18. All other sectors of the S&P 500 have fallen during 2022 except for the financial sector, which is up slightly. XLE has $35 billion in assets and annual expenses of 0.12% of assets. It is highly concentrated, with shares of Exxon Mobil Corp. XOM  and Chevron Corp. CVX making up 43.5% of the portfolio.
  • The iShares Global Energy ETF IXC  holds 46 stocks, including all the stocks held by XLE. It brings in large non-U.S. companies, such as Shell PLC SHEL,   TotalEnergies SE and BP PLC BP.  (For the three companies just listed, the first ticker is a European listing, the second is the American depositary receipt, or ADR. Many of the locally traded non-U.S. companies listed below also have ADRs.) IXC has $1.9 billion in assets, with an expense ratio of 0.43%. The fund’s largest two holdings are Exxon Mobil and Chevron, which together make up 25.3% of the portfolio
  • The iShares S&P/TSX Capped Energy Index ETF  XEG  holds 20 stocks of Canadian energy producers. It is also heavily concentrated, with the three largest holdings, Canadian Natural Resources Ltd CNQ, Suncor Energy Inc. SU, and Cenovus Energy Inc. CVE  making up 62% of the portfolio. The ETF has 2 billion Canadian dollars in total assets, with an expense ratio of 0.63%.

Analysts’ favorite oil stocks

Together the three ETFs hold 64 stocks. Here are the 18 stocks from that group rated “buy” or the equivalent by at least 80% of analysts polled by FactSet, sorted by the 12-month upside potential implied by consensus price targets. Share prices and consensus price targets are in the currencies of the country where the stocks are listed.

CompanyTickerCountryShare “buy” ratingsClosing price – Feb. 18Cons. price targetImplied 12-month upside potentialHeld by
Advantage Energy LtdAAV-CACanada85%$6.009.5259%XEG
Birchcliff Energy Ltd.BIRCanada86%6.289.7355%XEG
Parex Resources Inc.PXTCanada100%26.6837.4540%XEG
Tourmaline Oil Corp.TOUCanada100%46.1364.0739%XEG
Tamarack Valley Energy Ltd.TVECanada92%4.716.5238%XEG
ARC Resources Ltd.ARXCanada100%14.4019.8738%XEG
Enerplus Corp.ERFCanada85%14.8119.7734%XEG
Secure Energy Services Inc.SESCanada100%5.987.8131%XEG
Whitecap Resources Inc.WFCCanada93%9.1311.9030%XEG
Freehold Royalties Ltd.FRUCanada87%13.2016.8027%XEG
Santos Ltd.STOAustralia82%6.878.6125%IXC
Shell PLCSHELU.K.80%19.4424.0724%IXC
Cenovus Energy Inc.CVECanada100%19.6023.7521%IXC, XEG
ConocoPhillipsCOPU.S.87%89.63104.6117%XLE, IXC
Diamondback Energy Inc.FANGU.S.85%131.47148.0913%XLE, IXC
Valero Energy Corp.VLOU.S.81%86.7294.419%XLE, IXC
Schlumberger N.V.USBU.S.93%40.2143.338%XLE, IXC
EOG Resources Inc.EOGU.S.82%111.62119.757%XLE, IXC
Source: FactSet

You can click on the tickers for more about each company.

We have included dividend yields, as calculated or estimated by FactSet. Don’t assume dividends are distributed quarterly, as is common for U.S. stocks. Some companies only distribute annually.

You might be wondering why Exxon Mobil and Chevron didn’t make the screened list, above. Only 35% of the analysts polled by FactSet rate Exxon Mobile a “buy,” after the stock’s 26% increase this year through Feb. 18 and its 49% increase from a year earlier. Chevron didn’t make the list even though it is rated a “buy” by 74% of analysts because the analysts see “only” 8% upside for the stock over the next year. Then again, both of these stocks have attractive dividend yields, as you can see on the next list, and neither was forced to cut its dividend during the pandemic, when so many other companies did so.

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