Back to top

Image: Bigstock

Volatility Worries? These Oil Stocks Resilient: CVX, COP, EOG

Read MoreHide Full Article

Companies in the oil-energy sector are vulnerable to crude price volatility, which exposes their businesses to considerable uncertainty. Fluctuations in oil prices can affect revenues, profitability and cash flow, making it challenging for these companies to predict earnings and plan long-term investments.

However, this doesn’t mean investors should avoid energy companies altogether. Firms like Chevron Corporation (CVX - Free Report) , ConocoPhillips (COP - Free Report) , and EOG Resources Inc (EOG - Free Report) boast strong balance sheets that enable them to navigate extreme commodity price volatility. These companies are well-positioned to weather market downturns due to their robust financial health and prudent debt management.

Strong Balance Sheet Helps Weather Oil Price Volatility

Companies with strong balance sheets typically maintain lower debt levels, which reduces the burden of high-interest payments during periods of low oil prices, minimizing financial strain and lowering the risk of default. Additionally, these companies often have substantial cash reserves, providing the liquidity needed to cover operational costs and service debt and continue investing in maintenance or growth opportunities even when revenues are under pressure. This financial cushion allows them to remain resilient during downturns, ensuring that essential operations continue without compromising the company’s stability.

Moreover, strong financial health grants these companies the flexibility to make strategic decisions, such as hedging against price fluctuations, acquiring distressed assets at attractive prices, or sustaining capital expenditures that support long-term growth. Firms with robust balance sheets also benefit from better credit ratings, enabling easier and cheaper access to capital markets. This financial advantage allows them to raise funds at favorable terms, providing a distinct edge over weaker companies that might struggle to secure financing during challenging times.

3 Oil Stocks to Watch: CVX, COP, EOG

CVX’s Financial Strength Shields Against Oil Volatility

Chevron, carrying a Zacks Rank #3 (Hold), stands out within its industry for having one of the strongest balance sheets. With a debt-to-capitalization of just 12.6%, lower than the industry average of 22.6%, CVX is well-positioned to handle oil price volatility. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Zacks Investment Research Image Source: Zacks Investment Research

With its upstream business being the primary contributor to total earnings, Chevron’s total debt appears manageable. This is due to its substantial presence in the Permian Basin, the most prolific oil and gas-producing region in the United States. The strong production from this Basin not only boosts Chevron’s earnings but also supports its ability to manage its debt obligations, reinforcing the company’s overall financial stability.

COP’s Sound Financials Act as a Safety Net

ConocoPhillips has a debt-to-capitalization ratio of 26.9%, lower than the industry average of 31.2%. This lower exposure to debt capital gives the company a financial cushion, making it better equipped to navigate oil price volatility and periods of low crude prices. The reduced reliance on debt enhances #3 Ranked ConocoPhillips' financial flexibility, helping it maintain stability even in challenging market conditions. COP’s strong presence in U.S. resource plays enables the company to generate substantial cash flows, aiding it in managing debt obligations.

Zacks Investment Research Image Source: Zacks Investment Research

 EOG’s Low Debt Weight Provides a Cushion 

With a debt-to-capitalization of just 11.5%, significantly lower than the industry average of 31.2%, EOG Resources is well-positioned to handle oil price volatility. The leading exploration and production company with Zacks Rank of 3 has a massive inventory of premium drilling wells that will continue to generate significant cashflows to support its balance sheet.

Zacks Investment Research Image Source: Zacks Investment Research


See More Zacks Research for These Tickers


Pick one free report - opportunity may be withdrawn at any time


Chevron Corporation (CVX) - free report >>

ConocoPhillips (COP) - free report >>

EOG Resources, Inc. (EOG) - free report >>

Published in