Markets showed a downturn today, influenced by a cascade of interconnected factors. At the forefront, investors are growing uneasy over a potential spike in inflation rates, which dovetails into a subsequent concern. This apprehension emerges from escalating oil prices, an upshot of the Russian-Saudi pact to maintain their oil production curtailments until December. As oil benchmarks hover around $90 per barrel, the ripples are felt in the US with gasoline prices on an upward trajectory, notwithstanding the end of the prime summer driving period.

Direct repercussions of elevated gas prices are felt on inflation. A report from AAA highlighted that the national average for a gallon of regular unleaded hit $3.80 on September 6. This outstripped the high from the previous year, solidifying its place as the second-highest average gas price nationwide. As this trend persists, anticipations are rife that the Federal Reserve could be cornered into contemplating more rate augmentations, magnifying recession probabilities.

However, oscillations in the market present ripe avenues for the astute investor. With petroleum benchmarks surging and gasoline prices on the incline, oil equities are primed for prospective profits.

Let’s delve deeper into a couple of these heavyweights:

ConocoPhillips (NYSE:COP)

The conversation invariably starts with ConocoPhillips (NYSE:COP). This titan, with a valuation exceeding $147 billion, consistently emerges as one of the predominant independent exploration and production entities in the oil spectrum. Their global footprint spans 13 nations, and they pride themselves on a formidable employee strength surpassing 9,700.

Their robust foundation places ConocoPhillips (NYSE:COP) as a stalwart, adept at navigating economic tumult. Recent figures highlighted their production prowess, with over 1,800 Mboe/d, a spike from the 1,700 Mboe/d in 2Q22. Cumulatively, as we approached the latter half of 2023, their yield stood at 1,798 Mboe/d, an upturn from the 2022 average of 1,738.

The LNG (liquefied natural gas) segment is another feather in their cap. Given its environmentally friendly credentials relative to coal and oil, LNG is gaining traction. With LNG endeavors in the Gulf of Mexico, the Caribbean, West Africa, and Australia, ConocoPhillips (NYSE:COP) is well-poised in this domain.

Their Q2 financials painted an impressive picture. They boasted $7.1 billion in liquid assets, post disbursing $2.7 billion to stakeholders through dividends and share buybacks.

Chevron Corporation (NYSE:CVX)

Chevron (NYSE:CVX), another behemoth in the energy space, stands tall with a staggering revenue of nearly $240 billion last year and a market capitalization touching approximately $318 billion.

Chevron’s prowess spans multiple domains – from oil and gas exploration, hydrocarbon transportation, refining infrastructures producing a medley of fuels and petrochemicals, to their retail forays via gas stations. They also have a pivotal partnership with Phillips 66 in producing industrial fuels and chemicals.

Their financials for 2Q23 indicated revenues that dipped by 29% from 2Q22, though they surpassed anticipations by over $900 million. Their bottom line flaunted an EPS of $3.08, beating projections.

Their robust cash flow was another highlight, with $6.3 billion emanating from operations, inclusive of the $2.5 billion free cash flow. This liquidity allowed them to reward shareholders with a whopping $7.2 billion via dividends and stock buybacks.

Having maintained and occasionally raised its dividends since 2005, Chevron’s (NYSE:CVX) recent announcement on July 28 set it at $1.51 per share, yielding 3.62%.

Raymond James analyst Justin Jenkins encapsulated the sentiment around Chevron succinctly. He said, “Given its robust financial footing, stellar shareholder returns, and an enviable asset repository, Chevron remains a standout even when distinguishing among the oil & gas leaders is challenging. Their 2Q earnings reiterate this sentiment, with the upbeat Permian production data spotlighting Chevron’s growth trajectory in that region.”

In this age of rapid fluctuations, while some sectors feel the heat, others like the oil sector find avenues of growth and potential.

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