Two strategies, four stocks that can grow at any oil price

The Iran crisis has reminded investors just how unpredictable the oil market can be. After the Strait of Hormuz was closed in March, Brent crude surged to $120 per barrel, while Dubai crude briefly hit a record above $166 per barrel. The International Energy Agency called it the largest oil supply disruption in the history of the global oil market.

In such conditions, a bet on prices effectively turns into a game of roulette. However, there are some investment strategies that can potentially work regardless of which way oil prices move.

If a company remains profitable even at $40-50 per barrel, it is likely to stay resilient in most market scenarios. When prices are high, such companies generate windfall profits, while when prices fall, they continue to produce cash flow even as higher-cost peers start slipping into the red. This approach works best in a volatile environment. The key risk is a prolonged decline in oil prices below $50 per barrel.

Chord Energy

Chord Energy (NASDAQ: CHRD) is one example of such a strategy. The company operates in the Williston Basin with a breakeven threshold of about $40-45 per barrel of WTI, which gives it resilience even in a weak market. On a call with investors on February 26, Chord Energy CEO Danny Brown said that since 2021 the company has returned $6.7 billion to shareholders, an amount more than its current market capitalization.

Chord Energy expects to generate about $700 million in free cash flow at a base price of $64 per barrel of oil and $3.75 per MMBtu of natural gas, while at current prices above $90, the company’s cash-generation potential is materially higher. The stock has already reacted: shares are up more than 50% year to date. Another factor underpinning the company’s resilience is the high share of long laterals in its inventory, at about 80%, which helped cut future finding and development costs by 22%.

On March 5, UBS analyst Josh Silverstein raised his target price on Chord Energy to $142 per share from $119 per share and maintained a “buy” rating. The same day, Piper Sandler analyst Mark Lear raised his target to $158 per share from $151 per share and kept an “outperform” rating. According to MarketWatch data, 16 analysts recommend buying the stock, another five suggest holding it, and only one advises selling. The average target price is $150.80 per share, implying 6% upside from the Thursday closing price.

Matador Resources

Matador Resources (NYSE: MTDR) follows a similar model, with a focus on the Delaware Basin: the company plans to increase oil production by 3% to 123,000 barrels per day while cutting capex by 11% to $1.5 billion. An important element is protection against price risks: about 50% of production is hedged with costless collars with a floor of about $53 per barrel and a ceiling of about $66 per barrel, securing a minimum level of cash flow even in a volatile market. In the fourth quarter, production reached a record 211,000 barrels of oil equivalent per day, while proved reserves rose 9% to 667 million barrels.

Since the start of the year, the stock has gained more than 45%. On March 20, JPMorgan raised its target price to $67 per share from $54 per share and maintained an “overweight” rating. On March 17, Mizuho had raised its target to $76 per share from $70 per share and kept an “outperform” rating. According to MarketWatch data, 18 analysts recommend buying Matador Resources stock, while another seven suggest holding it. The average target price is $68.14 per share, implying 8% upside.

Notably, major players such as ExxonMobil, Chevron, and Shell also have low breakeven thresholds, below $50 per barrel, but their diversified business models – refining, marketing, and chemicals – reduce their sensitivity to rising oil prices. As a result, they are lagging this rally in terms of returns: year to date, Chord Energy is up 53%, Matador 48%, while ExxonMobil has gained 33.5%, Chevron 30.5%, and Shell about 29%.

If the first strategy is built around sustainable profitability at oil prices above $50 per barrel, the second is based on reducing dependence on commodity prices themselves. Companies involved in transporting and processing hydrocarbons earn primarily on volumes, not on the value of the commodity. Put simply, as long as oil and gas continue physically moving through pipelines, such businesses generate relatively stable cash flow.

Kinetik Holdings

Kinetik Holdings (NYSE: KNTK) is a typical representative of this infrastructure strategy in the Delaware Basin, with a market capitalization of more than $7 billion. The company earns money from gas gathering, compression, processing, and transportation, operating primarily under fixed-fee contracts, which makes its cash flow more predictable. It expects adjusted EBITDA of $0.95-$1.05 billion, representing 7% year over year growth at the midpoint, while its dividend yield is about 7% with a quarterly payout of $0.81 per share and a targeted dividend growth rate of 3-5% a year.

Another plus is the extension in 2025 of key contracts with its largest customers into the mid-2030s, alongside a shift to a fixed-fee model, which further strengthens the business. Since the start of the year, the stock has gained about 29%, and on March 17, Scotiabank raised its target price to $51 per share while maintaining an “outperform” rating. Year to date, Kinetik Holdings stock is up nearly 30%. The company has 13 Wall Street “buy” ratings and another four “hold” ratings. The average target price is $49.90 per share, implying about 6.9% upside.

Still, this business is not fully insulated from risks: Kinetik Holdings depends directly on drilling activity in the region. If producers cut output amid lower prices, throughput volumes decline – and with them revenue, even when contracts are in place.

USA Compression Partners

USA Compression Partners (NYSE: USAC) is closer to a pure infrastructure model: unlike Kinetik, it is not engaged in processing, but specializes in compression services, a critical component needed regardless of gas prices. That makes its business less sensitive to commodity swings.

Its dividend yield is about 7.5% with a quarterly payout of $0.525 per share, while its market capitalization stands at about $3.9 billion. The company has a consistent distribution record, making it attractive for income-focused investors. It expects adjusted EBITDA of $770-800 million, with the main contribution to growth coming from the January acquisition of service company J-W Power.

Since the start of the year, USA Compression Partners shares have gained about 20%. At the same time, the shares are marked by low volatility: a beta of 0.16 means they react only modestly to broader market moves, historically by about 1.6% when the market changes by 10%. In late February, Stifel raised its target price to $30 per share from $27 per share and maintained a “hold” rating. On March 9, Texas Capital upgraded the stock to “strong buy” from “hold” and raised its target price to $31 per share from $26 per share. According to MarketWatch data, two Wall Street analysts recommend buying the stock, while four suggest holding it. The average target price is $29 per share, implying about 5% upside.

This material does not constitute individualized investment advice.