My 2 Top Oil Stocks to Buy in 2025

Industry Overview - Crude oil prices remained stable in 2023, with Brent oil closing at approximately $77 per barrel, down 3%, and WTI ending at around $71 per barrel, unchanged from the start of the year [1] - Analysts predict that crude prices will continue to hover in the $70s range in 2025, indicating that oil stocks will need additional catalysts beyond oil price increases to drive share price growth [2] ConocoPhillips - ConocoPhillips completed a significant acquisition of Marathon Oil for $22.5 billion, which included assuming $5.4 billion in debt, enhancing its resource portfolio with over 2 billion barrels at an average supply cost below $30 per barrel [3] - The company initially projected $500 million in cost and capital synergies from the acquisition but has since revised this estimate to over $1 billion within the first year, which is expected to significantly boost free cash flow [4] - ConocoPhillips has increased its dividend by 34% and plans to return a substantial portion of its growing cash flow to shareholders, aiming for dividend growth in the top 25% of S&P 500 companies [5] - The company has raised its share repurchase program from $5 billion to $7 billion annually, with plans to retire all equity issued for the Marathon Oil acquisition within two to three years [6] Chevron - Chevron is in the process of acquiring Hess for $60 billion, a deal that would enhance its production and free cash flow growth outlook into the 2030s, potentially doubling its free cash flow by 2027 under a $70 oil scenario [7] - There is an ongoing arbitration regarding a change of control clause related to a joint development agreement with Exxon and CNOOC in Guyana, which could impact the acquisition [8] - If Chevron successfully navigates the arbitration, the acquisition will significantly strengthen its long-term growth profile, adding valuable resources in Bakken, Gulf of Mexico, and Southeast Asia [9][10] - Even in the event of a loss in arbitration, Chevron expects to grow its free cash flow by over 10% annually through 2027, supported by high-return capital investments [11] - Chevron has a long-standing history of increasing dividends annually for over three decades and plans to continue share repurchases within a $10 billion to $20 billion target range [12] Conclusion - Both ConocoPhillips and Chevron are positioned for significant growth in 2025 due to their recent acquisitions, making them standout investment opportunities in the oil sector [13]