Energy stocks have been one of the few bright spots in the stock market over the past year. In general, rising inflation and interest rates have been major headwinds for most parts of the economy. Energy, however, tends to thrive in this sort of situation. Inflation tends to coincide with higher energy prices. And energy companies, with their massive cash flows, typically don’t have to worry about interest rates or Central Bank actions too much either.

However, oil and natural gas prices have cooled off in recent months. Oil has slipped back well below the $100 mark, while natural gas prices have plunged amid an unusually warm winter.

This oil and gas rally pause marks a great entry point for energy stocks. After all, inflation is still hot, and geopolitical problems in Russia and elsewhere will continue to curtail the global oil and gas supply. That all adds to these seven energy stocks being primed to outperform in 2023.

BP (BP)

Regarding energy stocks, few are hotter than BP (NYSE:BP) right now. The company reported earnings last week, and shares jumped 15% in the days following those results.

BP announced massive profits, but that’s not too surprising. What really set off the excitement was BP’s corporate pivot. Historically, BP had been one of the firms that had been quickest to adopt green and renewable energy alternatives. However, as a recent report suggested, BP’s CEO had become discouraged by low returns on the firm’s green investments.

Instead, BP announced in this earnings report that it would be scaling back its low-carbon investments. In its place, the company will return more capital to shareholders, particularly by boosting the firm’s buyback program.

BP stock has moved to new 52-week highs on this news. Despite that, shares are still cheap, as BP had been badly out-of-favor with investors during its renewable energy phase. Today, shares still go for just six times forward earnings while offering a 3.9% dividend yield. And, with a large buyback on the way, that should only boost earnings going forward.

Exxon Mobil (XOM)

Exxon Mobil (NYSE:XOM) is one of the world’s largest oil companies. It has achieved this by operating on a generational timescale. ExxonMobil puts capital to work on a decades-long basis and consistently underwrites new projects when others are shying away. This contrarian streak, for example, showed itself in the late 2010s when Exxon Mobil kept investing in its huge offshore Guyana field even as other rivals slashed new oil & gas production spending.

Once the price of oil surged again in 2021, the successful Guyana bet put Exxon Mobil in the driver’s seat among major international oil producers. Guyana has become one of the world’s fast-growing economies, and ExxonMobil has played a key part in that.

Shareholders have been amply rewarded. XOM stock has nearly quadrupled since its 2020 lows, and shares hit fresh all-time highs in February. Not bad for a company whose roots go back to 1870. Even after the huge run-up, shares go for just 11 times forward earnings. In addition, thanks to being an integrated major, Exxon has a variety of other assets in refining, chemicals, and so on, which reduce oil price-related risk.

Chevron (CVX)

Chevron (NYSE:CVX) has also been on a winning streak. Shares have moved to fresh all-time highs amid record profits and a stunning $75 billion new share repurchase program.

Chevron’s strength comes from its massive production base. It has production facilities on every continent on Earth except Antarctica. The company produces more than 3 million barrels of oil and equivalents every day.

In recent years, Chevron has put a lot of money into working in liquefied natural gas (LNG). This technology allows Chevron to produce gas in remote parts of the world and ship it to markets with higher demand and prices. This has proven invaluable over the past year as Europe has rushed to import LNG to replace its gas supplies from Russia.

Chevron currently has a market capitalization of $330 billion. This means that the current $75 billion share repurchase program would buy up more than 20% of the entire company based on today’s share price. That program, in addition to a reasonable starting valuation and a 3.5% dividend yield, should give investors strong returns.

Valero Energy (VLO)

Valero Energy (NYSE:VLO) is America’s largest independent refining company. Refining has historically been a cyclical boom and bust-market with limited profitability. Investors understandably gave refining stocks low valuation multiples.

However, times have changed. Refining, within North America at least, has become far more profitable. That is due to fracking. The oil production rise in the American heartland has given the refining industry more inputs. Meanwhile, thanks to limited amounts of new pipelines and export capacity, America has ended up with a glut of crude oil. This has amounted to refiners earning much higher profit margins on their sales of gasoline, jet fuel, asphalt, and so on than they used to.

In addition, refining has become a scarce asset. Environmentalists and government regulation have made it nearly impossible to build new refineries, making existing ones more valuable due to the lack of new competition. This is to say that refining stocks should be worth a lot more than they used to be.

And yet, investors seem to be skeptical. Valero is currently trading for just six times forward earnings. The company has also, impressively, quadrupled its dividend over the past decade, and shares yield 3%. Refiners, including Valero, are earning record profits, and yet their shares still seem to be underappreciated on Wall Street. With refining margins surging again to start 2023, VLO stock price should follow.

YPF (YPF)

YPF (NYSE:YPF) is Argentina’s large state-managed oil company. After years of struggling, YPF has enjoyed a revival recently. Indeed, as YPF’s recent corporate presentation announced: “We are back.” YPF stock has soared from $3 to $12 since last summer, putting some numbers behind that sentiment.

YPF’s name to claim is its shale reserves. The firm’s Vaca Muerta shale field in Argentina amounts to one of the world’s largest easily-developable shale fields in the world. In addition to the company’s world-class oil reserves, it also has extensive pipelines and natural gas operations. This gives the firm diversity and reduces its risk if oil prices drop.

YPF shares are up nearly 200% over the past year. Even so, the stock is astonishingly cheap. YPF will have earned just shy of $5 a share in 2022, meaning that the stock is going for 2.4 times earnings. Incredible stuff.

Yes, the company is Argentine and comes with the political risk associated with assets in that country. Even so, a large energy firm with a diversified business model and massive shale reserves deserves to trade for a much higher P/E ratio.

Ecopetrol (EC)

A common theme of the energy sector is that shares have already appreciated sharply over the last year as conditions have improved. However, one company bucks that trend. That’s Ecopetrol (NYSE:EC). EC stock has been roughly flat over the past six months and is actually down 20% over the past year.

However, while the share price doesn’t reflect it yet, Ecopetrol’s business is firing on all cylinders. The company generated $7 billion in net income over the past year and produced its highest earnings per share figure since 2013. As Ecopetrol’s market capitalization is just $22 billion, this means that the company is going for just three times earnings. Adding to the excitement, shares currently offer a dividend yield of 21%. That’s not a misprint.

So what’s the deal? Political risk. Ecopetrol, after all, is the state-run oil company of Colombia. Colombia elected a left-wing president last year, and investors have assumed that he will damage the company’s operations.

What these foreign investors might not realize, however, is that since the government controls the majority of Ecopetrol’s stock, the government relies on said 21% dividend yield to fund its operations. Indeed, since taking office, the new administration has cracked down on private-sector oil companies, while state-managed Ecopetrol has boosted its investments.

Long story short, Ecopetrol is generating record profits and returning the lion’s share to its shareholders (primarily the Colombian government) via a massive dividend. Thanks to investor confusion over new government policy, Ecopetrol shares are available at a massive discount to most other energy companies today.

ChampionX (CHX)

ChampionX (NYSE:CHX) is an energy services company that came about from the merger of Apergy with Ecolab’s (NYSE:ECL) upstream energy business.

The company today offers a wide variety of services to energy companies. ChampionX can provide production chemicals, well construction and completion, gas lift, mining, construction tools, and so on. There are also digital solutions such as oil equipment monitoring along with tracking site emissions.

The company has enjoyed a huge rebound in demand as the oil and gas sector has recovered. ChampionX’s revenue soared from $1.1 billion in 2019 to $3.8 billion in 2022. Analysts expect revenues to top $4 billion this year.

Shares are trading at 17 times projected 2023 earnings and 14 times projected 2024 earnings as analysts forecast double-digit earnings growth. This upturn in activity should be sustainable, as higher energy prices have made it profitable for ChampionX’s clients to invest much more in the expansion and maintenance of their facilities. As such, ChampionX should be a good way to profit by providing the tools and services needed to fuel the energy industry’s current upturn.

On the date of publication, Ian Bezek held a long position in EC, BP, ECL, and XOM stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.