Oil and gas stocks have had their watershed moments in the past year, with unprecedented inflation prompting oil prices to soar to new heights. This was further compounded by Russia’s invasion of Ukraine, constricting supply and consequently positively impacting share prices. However, the Federal Reserve’s efforts to curb inflation have normalized energy prices in recent months. Nevertheless, given the geopolitical situation and macroeconomic climate, there are plenty of energy stocks to watch.

Energy stocks have had a great run for the better part of the year, but have dropped a fair share in recent months. Moreover, despite the Fed’s commitment to a hawkish policy, the erosion of purchasing power will take some time to fix, which bodes well for energy stocks. Therefore, buying discounted oil stocks now could pay off big time for anyone with faith in this market.

Chevron (CVX)

Chevron (NYSE:CVX) had a banner year on the back of robust oil prices. Though earnings are likely to normalize next year, there is still every reason to remain optimistic about their CVX stock. As an income investment, Chevron offers an incredible dividend yield with consistent distributions to shareholders over the years. Going into 2023 and beyond, Chevron has the potential to be more than just an income play; if market conditions improve, investors could continue to grow returns in the future.

In the third quarter, the energy giant reported impressive earnings of $11.2 billion and distributed $2.7 billion back to shareholders. Moreover, with a payout ratio of 0.32, it can continue to pay a high dividend for the foreseeable future. Chevron hasn’t reduced its dividend since 1988, a testament to its commitment to rewarding its shareholders.

Vestas Wind Systems (VWDRY)

Vestas Wind Systems (OTCMKTS:VWDRY) is a leading wind energy company, and one of the leading green energy picks for 2023. With forward-thinking business operations and long-term sustainability initiatives, Vestas should remain at the forefront not only in 2023 but well into the post-carbon future.

Wind-generated electricity is an increasingly important part of the U.S.’s overall production, accounting for a sizeable 10.2% of total power output. This is expected to become even more pronounced in the coming years, with the wind power market projected to increase at an impressive average annual rate of 9.4% between 2022 and 2030. Wind energy companies such as Vestas are set to reap substantial rewards from this trend. In its most recent quarter, the firm’s turbine order and services backlog remain sizable at €‎18.1 billion and €‎32.8 billion, respectively. Moreover, the stock is currently trading at below ten dollars, with plenty of upside ahead.

ConocoPhillips (COP)

ConocoPhillips (NYSE:COP) is another top pick in the energy space for 2023. The oil giant had an incredibly successful year in 2022, as its net income nearly doubled in the third quarter. The stellar financial performance resulted from superb management decisions, effective cost management and a red-hot market for fossil fuels.

Moreover, with its incredible financial stability, ConocoPhillips is in a great position to continue on its current trajectory. Whether it’s investing in new projects and acquisitions or simply building up an even larger cushion for leaner times, the company having an impressive $8 billion in cash on hand is likely to ensure more growth over the coming years. Its current cash balance is an amazing 59% improvement from the same period last year. With such sound footing, ConocoPhillips looks primed to take off next year.

Array Technologies (ARRY)

Array Technologies (NASDAQ:ARRY) is a leading supplier of solar tracking systems in the U.S. and internationally. With a series of successful acquisitions, Array Technologies has made great strides in 2022. Its third-quarter performance was especially impressive, showing a whopping 173% increase in sales from last year, making it a highly attractive renewable energy play.

In January, Array Technologies made a bold move with its acquisition of STI Norland, a top Spanish solar tracker and fixed structure manufacturer. Consequently, Array’s revenues rose dramatically, and the firm could post $28.6 million in net income in the third quarter. A year prior, it had lost $33 million in revenue, which called into question its financial standing. Now, investors in Array Technologies can be more confident about its future prospects in a more conducive environment next year.

Valero Energy (VLO)

Valero Energy (NYSE:VLO) is an industry leader in the global energy sector, and its impressive refinery portfolio reflects this. Not only does Valero own and operate refineries across North America, but it has also extended operations to the U.K., cementing its international presence. Valero’s contributions to the global energy sector have established it as a top-tier organization that demonstrates unparalleled commitment to energy production while upholding environmental standards. Their efforts afford them prime positioning in the industry, allowing them further growth opportunities with respect to both production and knowledge when looking towards the future of energy development worldwide.

The past few months have been incredibly exciting for Valero – the refining giant has seen refining margins soar due to fundamental factors, and are reaping huge rewards as a result. With no new refineries coming online for many years, existing infrastructure is being relied upon more heavily to meet consumer demand. Thankfully, Valero is well equipped to handle this strong demand; not only do they possess enough capacity to make sure their products are available when consumers need them, but they can also operate their existing refineries at a much higher rate than normal. This means that by taking advantage of high demand and prices hitting new highs, Valero is able to deliver more output and make more profit than ever before.

Woodside Energy (WDS)

Woodside Energy (NYSE:WDS) based in Perth, Australia, and representing the country’s largest independent dedicated oil and gas company, has been a major player in the energy industry for many years. Like other companies in the sector, the company has grown its sales and EBITDA by triple-digit margins in the past year.

Based on the robust natural gas and liquified natural gas prospects, the firm has a tremendous growth runway ahead. Moreover, it has an excellent track record of paying roughly 80% of its profits as dividends. Also, it boasts a robust balance sheet with incredible liquidity metrics. Hence, from a fundamentals perspective, it’s one of the best oil and gas players with strong wiggle room for long-term expansion.

Epsilon Energy (EPSN)

Epsilon Energy (NASDAQ:EPSN) is a Texas-based independent oil and gas firm and a great opportunity for value investors. It engages in various oil and gas production activities, making it a strong potential leader in the field. These production operations provide an attractive upside opportunity along with its stellar fundamentals and attractive price.

Investors may be pleased to hear that Epsilon has a considerable advantage in uncertain economic times, given its lack of debt. It boasts tremendous profitability metrics, with its EBITDA, gross profit and free cash flow margins growing by double-digit margins over the past five years. This means that the company is less vulnerable to changing financial conditions and can seize opportunities when they arise.

On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.