Oil at $115: The 5 Energy Stocks Still Worth Buying After a 34% Rally

The energy sector has been the undisputed winner of the first quarter of 2026. While the S&P 500 has fallen roughly 8%, the Energy Select Sector SPDR (XLE) has surged over 34%. Exxon Mobil has gained 42%. Chevron is up 28%. Even the smaller exploration and production names have delivered double-digit returns.

The question every investor is asking is simple: is it too late?

The answer, in our analysis, is nuanced. Some energy names are now fully valued for the current crisis. Others still offer compelling risk-reward even at $115 oil — particularly those with structural advantages that extend beyond the Hormuz disruption.

In this Insider Report, we analyze five energy companies that we believe offer the best combination of upside potential, downside protection, and structural positioning for a prolonged period of elevated oil prices.

Full analysis with valuation models, price targets, and portfolio construction guidance is available to BMInsider PRO members.

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The Bull Case for Energy in 2026–2027

Before diving into individual names, it is important to understand why energy stocks may continue to outperform even after a 34% rally.

The structural supply deficit in global oil markets predates the Iran crisis. Years of underinvestment in upstream production — driven by ESG pressures, shareholder demands for capital returns, and pandemic-era demand destruction — have left the global oil industry with insufficient spare capacity to absorb a major supply disruption.

OPEC+ spare capacity, once the market's safety valve, has been effectively depleted. Saudi Arabia can add perhaps 1–1.5 million barrels per day, but this is a fraction of the 10 million barrels per day lost from the Hormuz closure. The strategic petroleum reserves of the US, Europe, and Asia have been drawn down to levels that provide weeks, not months, of buffer.

Even if the Iran crisis resolves tomorrow, the oil market faces a multi-year rebalancing period. Restoring production capacity takes years, not months. The energy companies best positioned for this environment are those with low-cost production, strong balance sheets, and disciplined capital allocation.

Stock 1: Canadian Natural Resources (CNQ)

Price: ~$38 | P/E: 9x | Dividend Yield: 4.8% | Free Cash Flow Yield: 12%

Canadian Natural Resources is our top pick in the current environment. The company operates predominantly oil sands assets in Alberta — some of the lowest-decline-rate production assets in the world. Once the mining infrastructure is in place, oil sands production can continue for decades with minimal reinvestment.

At $115 WTI, CNQ generates approximately $15 billion in annual free cash flow against a market capitalization of $82 billion — an 18% free cash flow yield. The company has increased its dividend for 24 consecutive years and currently returns over 100% of free cash flow to shareholders through dividends and buybacks.

The key advantage of CNQ in the current environment is its production stability. Oil sands production is not subject to the rapid decline rates that plague shale wells. If the energy crisis persists, CNQ can maintain or grow production without significant capital investment increases.

Valuation: At 9x forward earnings with a 4.8% dividend yield and 12% FCF yield, CNQ is one of the cheapest large-cap energy stocks in the world. Our fair value estimate is $48–52.

Stock 2: Diamondback Energy (FANG)

Price: ~$175 | P/E: 8x | Dividend Yield: 5.2% | Free Cash Flow Yield: 14%

Diamondback is the premier pure-play Permian Basin operator. The company's inventory of drilling locations, enhanced by its 2024 acquisition of Endeavor, provides over a decade of high-return development opportunities.

At current oil prices, Diamondback's cash margins exceed $70 per barrel — among the highest in the US E&P sector. The company has committed to returning 75% of free cash flow to shareholders, and at $115 oil, this translates to a combined dividend and buyback yield approaching 14%.

Valuation: At 8x forward earnings, FANG is cheaper than the S&P 500 energy sector average of 11x. Our fair value estimate is $210–230.

Stock 3: Exxon Mobil (XOM)

Price: ~$135 | P/E: 12x | Dividend Yield: 3.4%

Yes, Exxon has already rallied 42%. But the company's integrated model — spanning upstream production, downstream refining, and chemicals — provides earnings stability that pure E&P companies lack. Exxon's Guyana operations, where production costs are below $25 per barrel, represent some of the most profitable barrels in the world.

The company's balance sheet is fortress-like, with net debt to EBITDA below 0.5x. This financial strength allows Exxon to increase shareholder returns even further if oil remains elevated, while also protecting against a potential price decline.

Valuation: At 12x forward earnings, Exxon is no longer cheap in absolute terms. However, relative to the quality and durability of its earnings base, the valuation remains reasonable. Our fair value estimate is $145–155.

Stock 4: TotalEnergies (TTE)

Price: ~€72 | P/E: 7x | Dividend Yield: 5.5%

TotalEnergies is the most undervalued of the European integrated majors. The company's diversified production base — spanning Africa, the Middle East, and Latin America — provides geographic risk mitigation that its peers lack. Importantly, Total has minimal direct exposure to the Persian Gulf disruption while benefiting from the elevated price environment.

TotalEnergies is also the most aggressive among European majors in renewable energy investment, which provides a hedge against the long-term energy transition narrative. The company has committed 25–30% of capital expenditure to renewable and low-carbon energy.

Valuation: At 7x forward earnings with a 5.5% dividend yield, TTE is remarkably cheap for a company of its quality. Our fair value estimate is €85–95.

Stock 5: Schlumberger (SLB)

Price: ~$55 | P/E: 14x | Dividend Yield: 2.5%

Schlumberger is our picks-and-shovels play on the energy supercycle. As the world's largest oilfield services company, SLB benefits from increased drilling activity regardless of which companies or countries are producing the oil.

The current environment — high oil prices combined with an urgent need to replace lost Hormuz volumes — is ideal for oilfield services companies. International exploration spending, which SLB is best positioned to capture, is accelerating rapidly as countries seek to diversify away from Middle Eastern supply dependence.

Valuation: At 14x forward earnings, SLB trades at a premium to E&P companies but at a discount to its own historical average during previous upcycles. Our fair value estimate is $65–75.

Portfolio Construction

For investors building an energy allocation: we recommend a 60/40 split between producers (CNQ, FANG, XOM, TTE) and services (SLB). This provides direct commodity price exposure while also capturing the structural growth in drilling activity.

Total portfolio allocation to energy: 15–20% for aggressive investors, 10–12% for moderate. This is well above the S&P 500's current energy weighting of approximately 4%, reflecting our conviction in the multi-year duration of elevated prices.

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