After a disappointing 2024, the energy sector may be on the verge of a recovery in 2025. Last year, the Energy Select Sector SPDR Fund, which tracks energy stocks in the S&P 500, posted a mere 2% return, significantly trailing the broader S&P 500 index’s 23% gain. This underperformance was primarily the result of oil prices, which initially rose but ended the year near their starting levels, weighing heavily on oil company equities.
Looking ahead, three energy companies—Devon Energy (DVN), ConocoPhillips (COP), and Chevron (CVX)—have been identified by analysts as standout potential performers. Here are the reasons these oil stocks could deliver strong results in 2025:
Devon Energy, a leading independent U.S.-focused oil and gas producer, generates roughly half of its revenue from oil and the other half from natural gas and natural gas liquids. The company holds substantial reserves across key production basins in the U.S. and benefits from a low breakeven price of approximately $40 per barrel, showcasing strong resilience against volatile market conditions.
Devon recently acquired assets in the Williston Basin, increasing its leverage. Although this acquisition added some debt, a recovery in energy prices in 2025 would enable the company to rapidly strengthen its balance sheet. This positioning makes Devon Energy particularly attractive, as it is poised to benefit from a direct correlation with rising energy prices, ultimately translating into significant returns for investors.
ConocoPhillips closed its acquisition of Marathon Oil at the end of 2024, significantly enhancing its U.S. portfolio of low-cost reserves. The company’s expanded resources now include 2 billion barrels with an average cost of supply below $30 per barrel—assets that are expected to improve profitability.
The acquisition is immediately accretive to ConocoPhillips’ earnings, cash flow, and shareholder returns. In the first year alone, the company estimates over $1 billion in cost and capital synergies, well above initial projections of $500 million. Additionally, ConocoPhillips has ramped up its shareholder return initiatives, recently boosting its dividend and authorizing up to $20 billion in share buybacks, with planned repurchases of $7 billion in 2025. These capital returns could help the company outperform other oil stocks in the upcoming year.
Following a challenging 2024 in which Chevron’s stock price declined, the company’s current valuation appears attractive. Chevron’s robust balance sheet and steady cash flow growth enable it to continue investing heavily in key upstream projects in the Permian Basin, Gulf of Mexico, and DJ Basin. The company aims to grow production in the Gulf of Mexico by nearly 50% by 2026.
Furthermore, Chevron is in the process of finalizing a $52 billion acquisition of Hess, which received antitrust clearance in late 2024. Chevron projects an annual average free cash flow (FCF) growth rate of over 10% and a compounded annual production growth rate of 3% through 2027. With Hess’s assets, these metrics are expected to grow even faster. Chevron’s consistent 37-year streak of dividend increases and its current dividend yield of 4.4% also add to its appeal as a long-term investment.
If oil prices rebound in 2025, upstream-focused companies like Devon Energy, which directly benefit from rising energy prices, are well-positioned for significant growth. At the same time, ConocoPhillips, with its acquisition-driven strategy, and Chevron, with its expansion plans and shareholder-focused returns, offer promising opportunities for investors. Together, these three oil giants have the potential to capitalize on the market recovery, making them valuable picks for the new year.
