Few industries have been harder-hit than the oil business this year. Oil prices have fallen more than 70% under crushing declines in oil demand. In the U.S., gasoline consumption has fallen to Vietnam-War-era levels, and crude prices have dropped to levels last seen in the 1990s. It's so bad that at one point this past week, U.S. crude oil prices actually went negative, as traders paid takers as much as $38 per barrel to take delivery of oil in May. That's right -- the "buyers" are going to get $38 per barrel, and the oil.

And it looks like it could be a long time before much of the industry can recover. Oil prices are only part of the problem; the bigger problem is a lack of storage for all the extra oil that's still being pumped by producers slow to respond to the collapse in demand.

Oil and gas prices on a computer screen

Image source: Getty Images.

And while this ugly scenario means most oil stocks should be avoided, there are still some high-quality businesses to be found. Four Fool.com energy specialists have identified businesses that may survive what is proving to be the worst downturn in the oil industry's history, and profit from the eventual recovery: integrated giant Phillips 66 (PSX 0.33%), Canadian pipeline giant TC Energy (TRP -0.28%), gas station operator Casey's General Stores (CASY 1.76%), and French super-major Total SA (TTE 0.58%).

Avoiding the riskiest part of the oil business

Jason Hall (Phillips 66): Independent oil producers and the companies they employ to work in the oilfields are facing a world of hurt. Global oil demand has fallen more than 30% by most estimates, yet oil production has been far slower to come down. As a result, any company that makes a living in the oilfields will take it hardest, and will be the last to benefit from the eventual recovery in oil demand.

Phillips 66, however, is able to avoid most of this pain: It doesn't produce any oil, since the 2012 split that made it a stand-alone refining, marketing, pipeline, and petrochemicals business -- in short, everything upstream of the oil wells. The company buys the oil that it uses, and that should help insulate it from some (not all, but some) of the impact of falling oil prices in its refining operation. Yes, it will feel the severe pinch from falling demand for gasoline and jet fuel, but its natural gas businesses, its pipelines, and its petrochemicals manufacturing should prove much stronger and more resilient than its oil-related segments.

Next, it has a management team that's proven excellent at navigating energy cycles, making sure the company has the cash it needs to ride out a prolonged downturn in fuel demand. With about $5 billion in cash and a low-cost credit facility, it will have no problem riding out the worst of things.

Put that together, and Phillips 66 has the benefits of being an integrated major, without the albatross of being an oil producer. With shares down more than 50%, patient investors should do well over the long term to buy and hold Phillips 66.

Built to endure downturns

Matt DiLallo (TC Energy): The oil market crash is shaking the sector to its core. A wave of bankruptcies, which has already started, will likely flow over the industry in the coming months. That will keep the pressure on energy stocks.

However, while financially weaker companies won't survive this downturn, several built their businesses to endure the market's inevitable ups and downs. One of those durable companies is TC Energy. The Canadian pipeline giant has several characteristics that put it in a solid position to survive the market meltdown and thrive once conditions improve.

First off, more than 90% of its cash flow has no exposure to commodity prices or volumes. Meanwhile, most of its customers have investment-grade credit ratings, which increases the probability that they'll have the funds to keep paying TC Energy. The company complements that solid cash flow profile with one of the highest credit ratings among its pipeline-operating peers. Furthermore, it has a low dividend payout ratio of 40% of its cash flow.

Thanks to those factors, TC Energy should have the financial flexibility to maintain its dividend -- which currently yields 5.2% -- and to finance expansion. Its current slate of projects has it on track to grow its cash flow at a mid-single-digit pace for the next several years.

While TC Energy isn't immune to this downturn, it's better prepared to navigate through the challenges thanks to its conservative financial profile. That makes it one of the few energy stocks to consider buying during these dark days.

Drivers will return to the road, eventually

Travis Hoium (Casey's General Stores): There aren't many parts of the oil industry that I would touch right now as an investor. Oil producers are in trouble now that oil is bouncing around zero. That will affect service companies, pipelines, refiners, tankers, and much more of the supply chain. What low oil prices may actually help long-term is the demand for gasoline at the pump. And that's why my pick is gas-station operator Casey's General Stores.

Oil prices are down because the demand for oil has been crushed due to COVID-19 economic shutdowns. But if we look out a year or two, I think demand will return as people hit the road at more normal levels. Consumption of oil may not be what it was in 2019, but it'll be higher than it is today, and that means Casey's General Stores will be busy again.

Casey's markets -- generally small Midwestern towns -- should also be less affected than those of competitors in larger cities. More workers in the company's markets will be considered essential (farmers, healthcare workers, and factory workers) and are less likely to be able to work from home, so the company may not be as hampered by COVID-19 as many oil companies in the U.S. The stock isn't cheap, trading at 25 times trailing earnings, but at this point, it's worth paying a high earnings multiple for a company with the kind of stability that Casey's provides.

The right place at the right time

John Bromels (Total SA): The recent oil price crash has been sudden and alarming. Investors were especially caught off guard by Monday's drop in U.S. benchmark West Texas Intermediate crude to negative $37.63 per barrel, meaning that producers were so desperate for anyone with storage capacity to take their oil off their hands that they were willing to pay nearly $38 per barrel just to get rid of the stuff.

Two things have become clear in recent days:

  1. Bigger companies with stronger balance sheets are more likely to weather the current industry conditions than smaller, weaker companies.
  2. The less exposure a company has to U.S. shale production right now, the better.

With that in mind, I'm recommending shares of French oil major Total. Like its big oil peers, it's been hit hard this year, with a share price that's fallen 41.2%. However, that means its dividend is currently yielding a juicy 9%.

Total has a strong balance sheet that includes a $27.4 billion cash hoard -- the largest among its peers -- and a high credit rating of Aa3/AA-, which should allow it the financial flexibility to maintain that payout. That's especially true now that Total has trimmed its 2020 capital expenditures by 20%.

Also, Total has the least exposure to U.S. oil production -- indeed, North American production -- of any of the oil majors, and it's not even close:

Company Percentage of 2019 Liquids Production from U.S.
Chevron 38.8%
BP 37.4%
ExxonMobil 27.1%
Royal Dutch Shell 29.4% (North America)
Total SA 10% (North and South America)

Data source: Company press releases. "Liquids" includes both oil and natural gas liquids.

Total's U.S. liquids production only consists of minority stakes in three Gulf of Mexico fields; it owns stakes in three additional Gulf of Mexico exploration blocks. So if the company decides to simply exit the U.S. market, it won't see as big of an impact on its total production as its peers will. Conversely, if it decides to stick around, the drain on its finances will be minimal by comparison.

I'm not sure the oil and gas industry is going to be a particularly good place to put your money in the coming months, but Total's low U.S. exposure and advantages of scale make it a top pick among oil stocks right now.