Big Oil companies like Exxon Mobil, BP, and Chevron may be some of the most recognizable oil company stocks you can buy, but they're actually some of the worst oil investments you can make right now.
Unlike more nimble American oil companies that are raking in huge profits in 2017, Big Oil stocks are all down on the year.
That's because the oil supermajors are stuck in "extremely expensive megaprojects that take years to finish," says Money Morning Global Energy Strategist Dr. Kent Moors.
And rising oil prices won't be enough to help these oil stocks...
Oil prices have surged nearly 20% since OPEC announced its agreement to cut production on Nov. 30. But even with oil prices above $50 a barrel, Big Oil companies like BP Plc. (NYSE ADR: BP) are still struggling.
Last month (Feb. 7), BP told investors it won't be able to make a profit unless oil prices rise above $60 a barrel.
That's why we are going to show you exactly which oil stocks to buy instead of these oil giants, so you can profit from higher oil prices.
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Wall Street analysts predict revenue for our first stock pick could balloon 35% this year alone. And they're predicting that will translate to double-digit gains in share price, too.
On top of that, this stock is paying a 6.82% dividend yield.
Before we get to our picks, here's where the real money in oil is being made...
Moors says American shale oil is where oil profits are being made now, but the oil supermajors are too late to the action.
Shale oil is so important because it's the leading source of American oil. Rystad Energy reports the United States has the largest oil reserves in the world. And over half of the U.S. reserves are in shale oil.
However, shale oil isn't easy to get out of the ground.
Shale oil is embedded in rock formations instead of underground wells. That means it isn't cheap to produce. And oil companies drilling for shale oil can't make a profit unless the price of oil is high enough. That price can be anywhere from $40 to $60 a barrel.
When oil prices plummeted last year - crude oil spot prices fell to $28.47 in January - U.S. shale oil companies struggled to survive.
By February 2016, Bloomberg reported U.S. shale producers were preparing for a 10% cut in shale production. By May, CNBC reported 40 independent shale producers had closed for good.
But crude oil prices would rise again.
In September 2016, OPEC agreed in principal to an oil production cut in an effort to boost oil prices. On Nov. 30, OPEC and 11 other countries signed a deal to cut oil production by 1.8 million barrels a day.
And now that oil prices are above $50 a barrel, shale oil has come roaring back.
The Baker Hughes rig count shows the United States added 135 oil rigs since the end of November, bringing the oil rig count up to 608 at the beginning of March. That's a 28% increase.
And the EIA's latest forecast predicts shale oil production will rise by 80,000 barrels this month, double its February projection.
Those forecasts have caused Big Oil companies to play catch-up.
In January 2017, Exxon Mobil Corp. (NYSE: XOM) bought $6.6 billion worth of shale oil acreage in the Texas Permian Basin, one of the top shale oil-producing regions in the world. And Chevron just unloaded $5 billion of assets in Asia last year as it plans to double its spending in the Permian Basin by 2020.
But Big Oil is too late.
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There are already smaller American oil companies established in the shale boom. And their profits are tied directly to shale oil production instead of the refining business or massive projects all over the world, which are burdens for the oil supermajors.
And those smaller American companies are where the best profit opportunities lie...
We're giving you our top plays to help you profit from the rebirth of American shale oil. Unlike the Big Oil company stocks that are sinking into the red this year, these oil stocks are on the rise.
And it's not too late to profit. Here are our best oil stocks to buy in 2017...
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Our two oil stocks are midstream companies that own and operate pipelines connecting the shale oil regions to major distribution networks.
Our first pick, Magellan Midstream Partners LP (NYSE: MMP), transports and stores crude oil and gas derived from shale regions across the United States and Canada.
Because midstream companies like Magellan don't have to worry about finding profitable drilling spots or refining crude oil, jobs the Big Oil players have to do, their profits are more closely tied to the shale oil boom.
And MMP has a profit margin of 36.4%. That's a sign of how a well-managed company can turn more of its revenue into profits by being focused on one part of the oil business.
Magellan Midstream Partners has more than 10,000 miles of pipeline connecting major oil fields across the country. And MMP is expanding its pipelines from the Permian Basin to the Gulf Coast, a major oil hub. Its new project will add 1.7 million barrels of capacity.
MMP currently trades at $77.67. Wall Street analysts are projecting its share price could climb up to $90 this year. MMP also pays a generous dividend yield of 4.4%.
Our second pick is Plains All American Pipeline LP (NYSE: PAA). PAA is another midstream oil company responsible for a network of pipelines and storage facilities. PAA profits from the growth of shale oil production because oil producers need to transport more oil to market.
PAA's pipelines connect shale regions in North Dakota and Texas to oil hubs in Cushing, Okla., and the Gulf Coast. The company's highest-volume assets are in the Permian Basin.
But PAA is expanding into other shale oil fields. Plains All American Pipeline just bought another midstream company, Advantage Pipeline LLC. That gives PAA control of a 70-mile oil pipeline to the Delaware Basin.
Wall Street analysts are projecting up to 35% revenue growth for PAA this year as shale oil continues to grow. And that could lead to share-price growth of nearly 20%, according to the same analysts.
Shares of PAA are currently priced at $32.89. The stock is up nearly 50% since this time last year, and it's paying a whopping 6.69% dividend yield. That's as good as the famous yields from Big Oil companies.
Saudi Arabia's $100 Billion Plan to End Big Oil: Billionaires have been dumping oil stocks at a frantic pace. Warren Buffett sold $3.7 billion worth of oil holdings, Bill Gates unloaded nearly $1 billion, and George Soros closed out multiple positions. A former intelligence operative believes it's connected with the new fuel Saudi Arabia is pouring $100 billion into. Click here to find out more...
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