Oil faces a 'serious problem' by 2024 as production capacity runs out, warns Goldman Sachs — here are 3 big oil stocks with yields as high as 3.8%

Oil faces a 'serious problem' by 2024 as production capacity runs out, warns Goldman Sachs — here are 3 big oil stocks with yields as high as 3.8%

Oil prices have cooled a bit in recent months, but Goldman Sachs sees a rebound on the horizon.

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Speaking on the sidelines of a conference in Saudi Arabia earlier this year, Goldman’s global head of commodities research Jeff Currie predicts that oil prices could climb back above $100 a barrel this year.

The analyst sees rising demand for oil from China. Meanwhile, sanctions against Russia will likely reduce the country’s oil exports.

“Are we going to run out of spare production capacity? Potentially by 2024, you start to have a serious problem.”

Economics 101 tells us that shortages drive prices up. If Currie is right and oil prices shoot up, oil producers stand ready to benefit.

Here is a look at three big oil stocks. Wall Street already sees upside in this trio.

Shell

Headquartered in London, Shell (SHEL) is a multinational energy giant with operations in more than 70 countries. It produces around 3.2 barrels of oil equivalent per day, has an interest in 10 refineries, and sold 64.2 million tons of liquefied natural gas in 2021.

It’s a staple for global investors, too. Shell is listed on the London Stock Exchange, Euronext Amsterdam, and the New York Stock Exchange.

The company’s NYSE-listed shares are up 8% over the past year.

Piper Sandler analyst Ryan Todd sees an opportunity in the oil and gas supermajor. The analyst has an ‘overweight’ rating on Shell and a price target of $70.

Considering that Shell trades at around $61 per share today, Todd’s price target implies a potential upside of 15%. The stock also offers a dividend yield of 3.8%.

Chevron

Chevron (CVX) is another oil and gas supermajor that’s benefiting from the commodity boom.

In 2022, the company reported earnings of $35.5 billion, which represented a 127% increase from 2021. Sales and other operating revenues totaled $235.7 billion for 2022, up 51% year over year.

Recently, Chevron’s board approved a 6% increase to the quarterly dividend rate to $1.51 per share. That gives the company an annual dividend yield of 3.8%.

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The stock is up slightly over the past year.

In January, Barclays analyst Jeanine Wai reiterated an ‘overweight’ rating on Chevron while raising the price target from $196 to $212. That implies a potential upside of 34% from the current levels.

Exxon Mobil

Commanding a market cap of over $430 billion, Exxon Mobil (XOM) is bigger than both Shell and Chevron.

The company also boasts the strongest stock price performance among the trio — Exxon shares are up 24% over the past year.

It’s not hard to see why investors like the stock: the oil-producing giant gushes profits and cash flow in this commodity price environment. In 2022, Exxon earned $55.7 billion in profits, a huge increase from the $23.0 billion in 2021. Free cash flow totaled $62.1 billion for the year, compared to $37.9 billion in 2021.

Solid financials allow the company to return cash to investors. Exxon pays quarterly dividends of 91 cents per share, translating to an annual yield of 3.5%.

Bank of America analyst Doug Leggate has a ‘buy’ rating on Exxon and a price target of $140 — around 32% above where the stock sits today.

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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.