Big Oil Wins Big as Oil Prices Hit $100
The recent surge in oil prices above $100 per barrel due to the ongoing Iran conflict has been beneficial for big oil companies. Companies that convert this expensive oil into massive amounts of cash are well-positioned to benefit from these high prices.
Two such companies are Occidental Petroleum (OXY) and Chevron (CVX). Oxy generates most of its revenue and profits from upstream exploration, drilling, and extraction business. It has a smaller midstream pipeline business and spun off its downstream business earlier this year, making it a more focused play on rising oil prices.
Oxy's breakeven price is at $40 per barrel for WTI crude oil, and analysts expect its adjusted EPS to surge 175% in 2026. The stock still looks like a bargain at 16 times forward earnings, despite already rising about 43% this year.
Chevron, on the other hand, is one of the world's largest integrated energy giants with upstream, midstream, and downstream businesses. It operates in 180 countries but gets most of its oil from the U.S., Kazakhstan, and Australia. Chevron has a more balanced long-term investment profile due to its diversification, and it raises its dividend annually for 39 consecutive years.
Chevron's scale and diversification have enabled it to raise its dividend annually for 39 consecutive years. It currently pays a forward yield of 3.4% and needs Brent crude to remain above $50 per barrel to cover its capex and dividends through 2030.