Three Smart Oil Stocks to Buy in 2025

The energy sector has seen a lackluster performance in 2024, with the Energy Select Sector SPDR Fund only managing a modest 2% return, in stark contrast to the S&P 500’s impressive 23%. Oil prices fluctuated during the year, but ultimately ended pretty much where they began, placing significant pressure on oil stocks. However, as we move into 2025, there are strong indications that multiple oil stocks could see significant rebounds. Despite last year’s disappointments, companies such as Devon Energy (NYSE: DVN), ConocoPhillips (NYSE: COP), and Chevron (NYSE: CVX) stand out as having the potential for more robust performances this coming year.

Devon Energy: A Recovery Play for 2025

Devon Energy has remained a formidable player in the U.S. oil and natural gas landscape. Known as one of the largest independent producers, the company maintains a balanced portfolio that is approximately 50% inclined toward both oil and natural gas. This diversified approach, coupled with a low break-even price of around $40 per barrel, provides Devon with a resilient foundation in the highly volatile energy market.

One of Devon’s key strengths is its substantial inventory that provides around a decade’s worth of drilling opportunities. Even amidst declining energy prices, the company has shown an ability to remain stable. However, the real excitement relates to the upside potential. With the recent acquisition of production assets in the Williston Basin, Devon’s leverage to rising energy prices has significantly increased. A recovery in oil and gas prices in 2025 could not only enhance the company’s revenues but also strengthen its balance sheet, yielding rewards for investors willing to take on some risk.

ConocoPhillips: Synergies and Shareholder Returns

Recently closing its acquisition of Marathon Oil, ConocoPhillips has positioned itself for a promising future. The added acreage and strategic resource distribution from this acquisition are expected to enhance its operational efficiency and profitability. With an average cost of supply below $30 a barrel, this integration is expected to deliver immediate earnings power and significant cash flow enhancements as early as 2025.

In its first year of ownership, ConocoPhillips anticipates realizing over $1 billion in cost and capital synergies, a figure that’s been revised upwards from prior projections. Such a financial boon places the company in a strong position to return capital to shareholders, as evidenced by its recent 34% dividend increase and expanded share buyback program of up to $20 billion.

This steady growth trajectory, along with a commitment to return a substantial portion of excess cash to shareholders makes ConocoPhillips a compelling stock to consider in the new year. The expectation of enhanced cash flows positions it to outperform many peers in a recovering market.

Chevron: Steady Growth and Robust Dividends

Despite a challenging market landscape that saw Chevron’s share price fall in 2024, the company consistently utilizes its strong balance sheet and growing cash flows to fuel expansion plans. Chevron’s proactive investment strategy is exemplified by its commitment of nearly $13 billion toward its upstream business in 2025. Targeting key production areas such as the Permian Basin, Gulf of Mexico, and DJ Basin, Chevron is positioned to ramp up production by nearly 50% in the Gulf of Mexico by 2026.

Additionally, Chevron’s anticipated $52 billion acquisition of Hess is a transformative opportunity that promises to bolster its production capacity and cash flow substantially. Chevron aims for a compound annual growth rate in production of about 3% and an even higher growth rate for its annual free cash flow—exceeding 10% on average through 2027.

Crucially, Chevron has demonstrated a commitment to its shareholders, having increased dividends for a remarkable 37 consecutive years. With a dividend yield of 4.4%, this oil and gas titan represents a reliable investment for those looking to ride through the market’s volatility.

Conclusion: Time to Consider Oil Stocks

As we approach 2025, a recovery in oil prices could provide essential support for companies like Devon Energy, ConocoPhillips, and Chevron. Their strategic positioning, focus on shareholder returns, and operational efficiencies make them solid candidates for investors looking to make the most of what could be a resurgent market. While the past year has been tough for energy stocks, these three companies are exceptionally well-placed to benefit from any upward momentum in the oil sector in 2025. For serious investors in commodities and resource-driven stocks, the time to consider these acquisitions is now.