Last year, record production in the United States and the sluggish economy in China kept the market balanced, limiting crude oil prices. Most analysts expect that crude oil prices in 2025 will be similar to those in 2024, remaining relatively stable, and there is a consensus that this year’s crude prices will stay around $70 per barrel. Therefore, oil stocks cannot rely on oil prices to boost their share prices this year. They need other catalysts. The two oil stocks with significant catalysts are ConocoPhillips (COP) and Chevron (CVX).
First, ConocoPhillips made a big splash last year. It acquired its rival Marathon Oil in a $22.5 billion all-stock deal (including the assumption of $5.4 billion in debt) that was completed at the end of November. This highly accretive transaction further deepened ConocoPhillips’ portfolio in the contiguous 48 states, adding over 2 billion barrels of resources with an average supply cost below $30 per barrel (WTI).
ConocoPhillips plans to return a substantial portion of its growing cash flow to shareholders. The company has already increased its dividend by 34%. Meanwhile, it has raised its stock buyback rate from $5 billion annually to $7 billion. This means the company is on track to repurchase all the equity issued for acquiring Marathon Oil within the next two to three years. If oil prices continue to hover in the $70 range, ConocoPhillips’ growing cash flow and cash returns should help it outperform its peers this year.
On the other hand, Chevron has been working to finalize a game-changing deal. The oil giant agreed to acquire Hess in an all-stock transaction worth $60 billion in October 2023. This deal will upgrade and diversify Chevron’s already world-class portfolio. It will also enhance and extend the company’s production and free cash flow growth outlook into the 2030s, helping the company more than double its free cash flow by 2027 (assuming oil is at $70).
There are predictions that Chevron will complete its massive acquisition of Hess this year, which will provide a significant boost for Chevron in 2025 and beyond. Chevron will be able to continue increasing its dividends (which it has done annually for over thirty years) and repurchase shares valued between $10 billion and $20 billion annually.
