Better Energy Stock: Chevron vs. Occidental Petroleum

Core Viewpoint - The energy sector is facing challenges due to economic scrutiny and uncertainties in U.S. trade policy, leading to fluctuating oil and gas prices, prompting investors to evaluate energy stocks for resilience and potential returns [1]. Chevron - Chevron is highlighted as a strong investment option, offering a high dividend yield of 4.9% and demonstrating resilience with only a 5% decline in stock price year-to-date [2][3]. - The company's global diversification and robust fundamentals make it appealing for long-term investment, with significant operations in upstream, downstream, and chemicals manufacturing [3]. - Major expansion projects, such as the Tengizchevroil oilfield in Kazakhstan and operations in the Gulf of Mexico, are expected to enhance production [4]. - Chevron targets an annual production growth rate of 6% to 8% for 2025 and 3% to 6% for 2026, with an anticipated increase in free cash flow to over $9 billion compared to$15 billion in 2024, based on a Brent crude oil price of $60 per barrel [5][6]. - The company plans to maintain its quarterly dividend of$1.71 per share and continue a large stock buyback program, supporting shareholder returns [6]. Occidental Petroleum - Occidental Petroleum, with a market capitalization of $36 billion, is smaller than Chevron but has a strong position in onshore oil and gas production, particularly in the Permian Basin [9][10]. - The company is diversified across chemicals, midstream infrastructure, and international assets, and is advancing its direct air carbon recapture facility [10]. - Despite a 22% decline in stock price year-to-date due to an intense investing spending plan, the stock is trading at attractive valuation metrics, under 12 times forecast 2025 EPS and 8 times free cash flow [11][12]. - Occidental may offer more upside potential if oil and gas prices rebound, making it a consideration for investors bullish on the energy sector [13]. Investment Decision - In the current macroeconomic environment, Chevron is considered the better energy stock due to its diversified asset base and higher-quality fundamentals, providing a more reliable option for investors while delivering solid dividend income [15].