Oil and gas prices are historically volatile, making investing in the industry tricky. However, global energy demands continue rising, and years of underinvestment and other geopolitical factors could keep oil and gas prices elevated for the next several years.
You could take a couple of different approaches if you’re looking to add energy exposure to your portfolio. Maybe you want a reliable income through consistently growing dividend payments. Or maybe you’d like to play potential long-term upside in oil and gas prices. If so, here are two no-brainer energy stocks you can add to your portfolio today.
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1. ExxonMobil
ExxonMobil (NYSE: XOM) is one of the world’s largest oil and gas companies. Its long track record of increasing its dividend payout makes it appealing to investors searching for steady income.
As an integrated oil and gas company, ExxonMobil operates across the entire oil and gas industry value chain. This includes exploring and extracting oil and natural gas (upstream operations), transportation and storage (midstream), and refining and distribution of oil and gas (downstream operations); ExxonMobil does it all.
By spreading its operations across the value chain, ExxonMobil’s business is more resilient to the changing oil and gas prices. Its upstream operations benefit from elevated oil and gas prices and can drive significant growth when prices surge.
For example, in 2022, when oil prices rose following Russia’s invasion of Ukraine, ExxonMobil’s upstream profit surged from $15.7 billion to $36.5 billion. However, these profits can be incredibly volatile. Last year, when prices leveled out, ExxonMobil’s upstream profit fell nearly 42% to $21.3 billion.
Here’s where its midstream and downstream operations provide stability. Transporting and refining oil and gas can balance out fluctuations in the price of oil and gas. That’s because its refinery business benefits from lower oil prices (due to lower input costs).
The oil market could remain “extremely tight,” according to the hedge fund Citadel (as reported by the Financial…
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