The economies are now reopening, thereby calling for more oil production since the commodity is a prime source of fossil fuel that is used for transportation and power. The rising demand for crude is reflected in the increasing price of the commodity, compelling investors to keep an eye on oil companies.
Oil Price Rally
The price of West Texas Intermediate crude, trading at more than $66 per barrel mark, has improved drastically from the pandemic-hit April last year, when oil was in the negative territory. With coronavirus vaccines being rolled out at a massive scale, there have been increased signs that the economy is reopening. This is going to boost oil and fuel demand further.
Explorers Returning to Shale Plays
With optimism on improving fuel demand picking up, oil drillers are gradually returning to shale plays. Per the weekly rig count data from Baker Hughes Company BKR, it has been a clear sign since the beginning of this year that drillers are adding oil rigs. The data suggests that in the week through May 21, 2021, the count of oil drilling rigs in the United States was recorded at 356, depicting a rise from the tally of 275 as of the week ended Jan 8, 2021.
Investors should know that Permian, the most prolific basin in the United States, witnessed an oil rig tally of 230 for the week through May 21, recording a jump from the tally of 179 in the week through Jan 8, per Baker Hughes’ data.
Permian Explorers in the Spotlight
With explorers and producers adding rigs to capitalize on the favorable crude pricing environment, it would be wise to focus on upstream players operating in the Permian. This is because, among all plays, Permian is likely to witness an uptick in production in June from May, per the U.S. Energy Information Administration (EIA).
Per EIA data, Permian will probably produce 4,589 thousand barrels per day of oil in June, higher than May’s production of 4,535 thousand barrels per day. Almost all other resources, including Anadarko, Bakken, Eagle Ford and Niobrara, will likely deliver lower oil production in June as compared to May, per the EIA.
4 Stocks to Gain
Now, it seems to be an opportune moment for energy investors to consider stocks of explorers operating in the basin. This is because Permian explorers are probably best positioned to capitalize on rising oil prices with higher production. Here, we present one Zacks Rank #1 (Strong Buy) stock and three Zacks Rank #3 (Hold) companies that are well positioned to gain. You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Dallas, TX, Matador Resources Company MTDR has a strong footprint in the liquid-rich Delaware Basin’s Wolfcamp and Bone Spring plays. The Zacks Rank #1 stock has witnessed upward earnings estimate revisions for 2021 and 2022, respectively, in the past seven days.
EOG Resources, Inc. EOG, headquartered in Houston, TX, has premium drilling locations in all prolific shale plays in the United States, including the Delaware basin, a sub-basin of the broader Permian. The company, with a Zacks Rank of 3, is likely to see earnings growth of 299.3% in 2021.
Headquartered in Midland, TX, Diamondback Energy, Inc. FANG is a pure-play Permian player with presence in more than 347,000 net acres in the Permian. The company has more than 12,300 gross horizontal locations, brightening its production outlook. Notably, the Zacks #3 Ranked stock has witnessed upward earnings estimate revisions for 2021 and 2022, respectively, in the past seven days.
Devon Energy Corporation DVN, headquartered in Oklahoma City, has a footprint across 400,000 net acres in the Delaware Basin. With multidecade inventory of drilling sites, the company’s production outlook seems bright. In the past 30 days, the stock, with a Zacks Rank of 3, has witnessed upward earnings estimate revisions for 2021 and 2022, respectively.
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