Filling up our vehicles became quite the experience in 2021, with lengthy queues and soaring prices punctuating a turbulent twelve months that saw widespread global disruption and increased demand for fuel – but one sector of the market is looking promising for 2022, and investors who are quick to act stand to make the best of it.
The energy sector led the market in performance in 2021, and with the tailwinds of the final quarter carrying many stocks nicely into the new year, we could be about to see a stellar performance from some of the top leaders over the next few months and beyond.
Fossil fuels might not be the most ethical place to invest your cash, but if you’re simply looking to turn a profit, then it might be something you’d like to consider. According to the most recent batch of official Energy Information Administration data, we saw the global benchmark Brent crude oil hit an average price of £59.60 in December – that’s just under £28 up on the previous year. Overall, energy stocks saw a 53 per cent total return, making them an attractive prospect for 2022.
With supplies of crude oil and natural gasses remaining short, energy analysts worldwide are predicting that we could see profitability remain high for some time – which means opportunities abound in the year ahead.
Platforms like the Oil Profit site are reporting a dramatic surge in the number of new sign-ups already this month, signalling a trend towards energy investment in 2022. If you’re considering jumping on board and riding the wave, then these are the top stocks to keep an eye on.
Worth an eye-watering £207.9 billion in terms of market value, Exxon is a front-runner that hasn’t escaped the attention of the world’s savviest energy investors, and with a dividend yield of 5.3 per cent, the US’s largest energy company looks poised to reassert itself over the next twelve months. Although lower commodity prices have damaged its shale-oil assets of late, and demand for liquefied oil gas dropped off at the height of the pandemic, the company has been making strides in Asian, European and African markets, cutting costs along the way to maximise profit.
In the third quarter of 2021, Exxon generated almost £5.4 billion in profits – a dramatic improvement on its £500 million loss during the same quarter of the previous year, and things are already looking promising for 2022, making it a good investment choice for the year ahead.
Phillips 66 is another hotly tipped energy stock to watch for 2022, with a current market value of £25.2 billion and a dividend yield of 4.9 per cent. A leader in the oil refining field, the firm has generated huge profits over the years from breaking crude oil down into its various fuel forms – not just for cars and other road vehicles, but also turning its attention to chemical production as part of its partnership with Chevron. A major producer of high-density polyethylene and polypropylene plastics, this focus has served it well in these unsettled times, and as the global economy continues to recover and demand for such materials surges, it has found itself in a favourable position as a result.
Turnover had increased dramatically in 2021 compared with 2020, which is to some degree, to be expected – but the size of the numbers we’re seeing are a sign that this could be a great company to invest in for 2022.
Magnolia Oil and Gas
A midsized option for energy investors to consider is Magnolia – a relatively new company that produces oil and natural gas in Eagle Ford Shale and Austin Chalk formations in the U.S. It has adapted a shrewd and low-cost business model since the start, having launched onto the scene back in 2018, and with a current market value of £2.6 billion and a dividend yield of 0.8 per cent, numbers are now looking promising.
Running a semi-annual dividend programme, it paid out 5.8p shares based on an average of £29.4 per barrel oil, and moving forward, we can expect to see payouts of 25.75p per share at an average of £40.40 per barrel.
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