3 Top Energy Stocks to Buy Now

By Matthew DiLallo Markets Fool.com

Despite OPEC's best efforts, oil prices haven't held up as well as expected, tumbling back below $50 per barrel over the past month. That decline has taken many top energy stocks down with it, including Devon Energy (NYSE: DVN), TransCanada (NYSE: TRP), and National Oilwell Varco (NYSE: NOV). However, given the improvements these energy giants made over the past year, they have the potential to create tremendous value for investors as they deliver on their growth plans. Because of that, investors should seriously consider taking advantage of the market's recent weakness to stock up on these energy stocks.

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Getting back to work

Devon Energy's stock is down nearly 5% over the past month -- and is down double digits for the year -- thanks to the recent slump in oil prices. However, the shale driller's best days appear to be ahead of it. That's because the company spent the oil market downturn focused on repositioning its portfolio, shoring up the balance sheet, and reducing costs. The results have been remarkable.

Image source: Getty Images.

Thanks to the strength of its acreage position, Devon Energy delivered the best drilling results in its 45-year history last year. New wells delivered an average 90-day initial production rate of nearly 750 barrels of oil equivalent per day, a more-than-300% improvement from 2012. Because the company is drilling more productive wells, and at lower costs than ever before, it can drill more wells with less money. As a result, oil production, which declined last year, should increase by 13% to 17% over the course of this year. Meanwhile, Devon has the asset base to accelerate its growth rate up to 20% next year if oil prices cooperate. That high-margin oil growth puts the company in the position to deliver peer-leading cash flow growth. It's a formula that should create value for investors over the long term, even if oil prices remain weak.

A pipeline of future growth

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TransCanada completed a transformation of its own last year, acquiring a large natural gas pipeline company in the U.S. while also selling some of its power assets. As a result of these deals, the Canadian energy infrastructure giant has improved the stability of its cash flow so that 95% now comes from fee-based andregulated assets. That steady cash flow gives TransCanada ample funds to pay a generous dividend and finance growth projects.

Additionally, TransCanada is in the midst of a significant growth phase. With 23 billion Canadian dollars of near-term growth projects in the pipeline, the company has the clear visibility to increase its dividend by 8% to 10% annually through 2020. Meanwhile, with another CA$45 billion of commercially secured projects for the longer term, TransCanada shouldn't have any problem extending that dividend growth, making it an excellent energy stock to own for the long term.

Image source: Getty Images.

Readying for the rebound

National Oilwell Varco had a rough time during the oil market downturn, with its revenue and profitability declining in every quarter for more than two straight years. However, the oil-field equipment maker seemed to turn a corner last quarter, achieving its first sequential revenue increase since late 2014. Furthermore, margins improved thanks to its efforts to drive out costs.

Aside from reducing costs and improving efficiency, National Oilwell Varco'sother main initiative during the downturn was to enhance its portfolio of products, with a focus on developing solutions that improve the economics of its customers. Because of this, the company should see its results steadily improve over the course of the year as oil producers put more rigs to work, which should drive demand for more equipment. Furthermore, National Oilwell Varco has the financial capacity to get back to deal-making, which could accelerate its growth potential as the oil market recovery takes hold over the course of this year.

Investor takeaway

While crude prices have been a bit more volatile than most expected this year, the oil market is improving. Because of that, investors should take advantage of the opportunity to buy high-quality energy stocks like Devon Energy, TransCanada, and National Oilwell Varco. What makes these three such great buys right now is that they have significantly improved their businesses over the past year, which positions them to create tremendous value as the oil market continues improving in the years ahead.

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Matt DiLallo owns shares of National Oilwell Varco. The Motley Fool owns shares of and recommends National Oilwell Varco. The Motley Fool owns shares of Devon Energy. The Motley Fool has a disclosure policy.