Energy stocks had a good run in the first half of 2021. The S&P Energy Select Sector Index is up 44% year to date. On Monday, the OPEC meeting was called off as member countries couldn't agree on an output increase for July. That likely means no output increases from the OPEC at least until August, when the members will meet again. This should again be bullish for oil prices and energy stocks in the near term.

Although most energy stock prices have already risen significantly, some are still trading at cheap valuations. Here are three such stocks to consider buying right now.


ExxonMobil (NYSE:XOM) faced a challenging time last year. The company's massive capital plans got jeopardized due to cratered oil demand because of COVID-19. Coupled with excessive supply, crude oil prices got pummeled. The deteriorating oil market also prompted the removal of ExxonMobil stock from the Dow Jones Industrial Average Index.

However, strengthened oil prices helped ExxonMobil post strong first quarter results. The company reported net income of $2.7 billion for the quarter.

XOM Net Income (Quarterly) Chart

XOM Net Income (Quarterly) data by YCharts

Even after rising 53% this year, ExxonMobil stock is down from its levels two years ago. Its yield is also 160 basis points higher than its average yield over the last 10 years. Exxon's shares are trading at a lower price-to-cash-from-operations multiple compared to its top peer Chevron (NYSE:CVX). Its price-to-free-cash-flow multiple of around 69 is also lower than Chevron's ratio of 79.

XOM Price to CFO Per Share (TTM) Chart

XOM Price to CFO Per Share (TTM) data by YCharts

As the above graph shows, ExxonMobil stock has historically traded at a premium compared to Chevron. A fall in return on invested capital and higher leverage impacted Exxon's stock price last year. As ExxonMobil's operations and leverage comes back on track, the stock's multiple should expand, too.

Enterprise Products Partners

Like ExxonMobil, Enterprise Products Partners (NYSE:EPD) stock is trading at a yield higher than its 10-year average yield of 5.9%. The stock's 7.3% yield is also higher than many of its peers', including Enbridge, ONEOK, and Kinder Morgan (NYSE:KMI). Uncertainty relating to future tax treatment for MLPs resulting from President Biden's tax proposal has likely contributed to Enterprise Products Partners' higher yield. 

XOM Dividend Yield Chart

XOM Dividend Yield data by YCharts

But the high yield doesn't make much sense. First, the proposal to eventually tax MLPs as C-Corps is still -- well -- a proposal. How it may look finally and how long it will take to come into effect is unclear. Second, there are some key benefits of converting to a C-Corp, such as access to a bigger capital pool, that may, in fact, be advantageous to Enterprise Products in the longer term.

As a conservatively managed company with a strong balance sheet, fee-based and diversified earnings, and strong distribution coverage, Enterprise Products Partners presents an attractive buy opportunity right now.

Three heavy-industry engineers talking in a factory.

Image source: Getty Images.

Kinder Morgan

With a dividend yield of 5.7%, Kinder Morgan is another great stock for long-term income investors. Several factors make the stock attractive. The company has been generating steady earnings despite fluctuating commodity prices, thanks largely to its fee-based contracts. Kinder Morgan has also improved its leverage since its infamous 2014 dividend cut. What's more, the stock's price-to-free cash flow ratio of 10 is lowest among that of its top peers.

KMI Price to Free Cash Flow Chart

KMI Price to Free Cash Flow data by YCharts

Kinder Morgan has a project backlog of $1.4 billion expected to be in-service through 2023. Though that looks low, the company is also growing through acquisitions. Kinder Morgan recently purchased natural gas and pipeline assets, which were jointly owned by Consolidated Edison and Crestwood Equity Partners, for $1.2 billion. 

Kinder Morgan is also focused on capturing opportunities in the low-carbon energy segment. It has formed a dedicated team that will work on prospects in this emerging segment. Low-carbon energy opportunities could be a significant growth driver for Kinder Morgan in the long term as the industry explores cleaner energy sources.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.