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For all the ups and downs of the oil industry over the past few years, there are signs that things are getting better for companies in this space. Sure, oil prices are all over the place, but capital spending is up and there are clear needs for new sources and infrastructure to move those new sources to market. So we asked three of our Motley Fool contributors to each highlight an oil stock they view as good buys now. Here's why they picked Enterprise Products Partners (NYSE: EPD), ExxonMobil (NYSE: XOM), and ConocoPhillips (NYSE: COP).
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This infrastructure stock is building pipelines and momentum
Tyler Crowe (Enterprise Products Partners): Back in 2017, Enterprise Products Partners management knew that it was on the precipice of a huge boom in pipeline and processing facilities construction. In order to finance this construction wave and to assuage investor concerns about issuing equity to pay for things, management elected to grow its payout at just about the slowest rate you can: a penny a year. The thought was that, by keeping payout growth low, it would be able to retain more cash over time to fund growth.
This past quarter was a shining example of why this was the right move. The oil and gas midstream company reported that its distributable cash flow was up 18% compared with this time last year and that it retained about $665 million to fund its capital spending for the year. Cash flow growth for a company of Enterprise's size is almost unheard of, and its ability to retain that much cash for growth is creating a virtuous cycle where it can now invest in even more ambitious pipeline and other infrastructure projects.
Enterprise has long been known for its conservative management, with a reputation of being good stewards of shareholder capital. Now it's proving that it can grow and meet the ever-increasing demands of the American oil and gas industry. For investors looking for a long-term stock in energy, Enterprise Products Partners is hard to beat.
Oil is expensive, but this oil giant's stock is still cheap
Rich Smith (ExxonMobil): I've said it before and I'll say it again: ExxonMobil is looking like a great oil stock to buy right now.
Across the country and around the globe, oil prices are surging, with WTI crude prices approaching $66 a barrel and Brent crude already north of $74. Earlier this week, CNBC pointed to a move by the Trump administration to cease granting waivers on sanctions against countries importing Iranian oil, a move that -- in CNBC's estimation -- could cause importers to recoil from Iranian production, and remove as much as a million barrels a day of production from the market.