The Zacks Oil and Gas - Exploration and Production - United States industry is facing a period of tightening margins and soft investor sentiment. Rising global output and gradual easing of production cuts by OPEC+ are weighing on crude prices, while economic uncertainty and muted industrial demand continue to cloud the near-term outlook. Although natural gas prices have shown resilience — supported by strong LNG exports and balanced inventories — cost inflation and the long-term shift toward clean energy keep the broader tone subdued. The group reflects these pressures through downward earnings revisions and weak returns. Amid this cautious backdrop, some players such as Cheniere Energy (LNG Quick QuoteLNG - Free Report) , Coterra Energy (CTRA Quick QuoteCTRA - Free Report) , APA Corporation (APA Quick QuoteAPA - Free Report) and Magnolia Oil & Gas Corporation (MGY Quick QuoteMGY - Free Report) stand out for their diversified portfolios, disciplined capital strategies, and exposure to gas-driven structural growth.

About the Industry

The Zacks Oil and Gas - US E&P industry consists of companies primarily based in the domestic market, focused on the exploration and production (E&P) of oil and natural gas. These firms find hydrocarbon reservoirs, drill oil and gas wells, and produce and sell these materials to be refined later into products such as gasoline, fuel oil, distillate, etc. The economics of oil and gas supply and demand are the fundamental drivers of this industry. In particular, a producer’s cash flow is primarily determined by the realized commodity prices. In fact, all E&P companies' results are vulnerable to historically volatile prices in the energy markets. A change in realizations affects their returns, causing them to alter their production growth rates. The E&P operators are also exposed to exploration risks where drilling results are comparatively uncertain.

4 Key Trends to Watch in the Oil and Gas - US E&P Industry

Oversupply Threatens Market Stability: The global oil market is again tilting toward oversupply as OPEC+ gradually relaxes its production curbs. The group’s decision to increase output despite patchy demand recovery has heightened the risk of inventory buildup. With non-OPEC producers also expanding output, global stockpiles could swell, putting downward pressure on prices. If supply continues to outpace consumption, producers may struggle to sustain margins, particularly in regions where breakeven costs are higher. This imbalance could discourage new exploration activity and weigh on investor sentiment toward the sector.

Demand Outlook Weighed by Economic Uncertainty: The demand outlook for oil remains uncertain amid weakening industrial activity and slower economic growth in key consuming regions. The combination of high interest rates, tepid manufacturing recovery, and lingering inflationary pressures has dampened consumption forecasts. As refiners trim crude intake and transportation demand plateaus, the pace of recovery in global oil consumption could lose momentum. For exploration and production companies, such a backdrop raises the risk of reduced pricing power and lower investment returns, especially if demand stays muted through 2025.

Natural Gas Finds Support: Despite periods of volatility, the tone across the natural gas market remains constructive. Futures climbed steadily through late September into early October, supported by record LNG exports, firm industrial demand, and a below-average storage build. While tepid temperatures temporarily eased heating demand, the market’s ability to hold above the psychologically important level of $3 reflects steady undercurrents of strength. With production slipping modestly and inventories only slightly above seasonal norms, supply appears balanced heading into the colder months.

EVs and Clean Energy Are Reshaping Oil’s Future: Global oil demand growth is expected to slow sharply after 2026 as electric vehicles gain popularity, freight transport adopts cleaner fuels like LNG, and power producers continue shifting away from fossil energy. These transitions suggest that oil consumption could peak around 2030, introducing long-term uncertainty for prices. As gasoline and diesel demand stagnates in developed economies, investors may become more cautious about backing large, long-term oil projects — a trend that could weigh on companies dependent on sustained high prices and continuous output growth.

Zacks Industry Rank Indicates Bearish Outlook

The Zacks Oil and Gas - US E&P industry is a 33-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #225, which places it in the bottom 7% of 243 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates challenging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group’s earnings growth potential. While the industry’s earnings estimates for 2025 have gone down 34.1% in the past year, the same for 2026 have fallen 38% over the same timeframe.

Despite the dull near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and current valuation first.

Industry Underperforms S&P 500 & Sector

The Zacks Oil and Gas - US E&P industry has fared worse than the Zacks S&P 500 composite and the broader Zacks Oil – Energy sector over the past year.

The industry has moved down 23.9% over this period compared with the broader sector’s decrease of 0.4%. Meanwhile, the S&P 500 has gained more than 18%.

One-Year Price Performance

Industry's Current Valuation

Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash expenses.

On the basis of the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), the industry is currently trading at 11.06X, significantly lower than the S&P 500’s 18.69X. It is, however, well above the sector’s trailing 12-month EV/EBITDA of 5.14X.

Over the past five years, the industry has traded as high as 16.02X, as low as 3.56X, with a median of 6.28X.

Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio (Past Five Years)

 

4 Stocks to Consider

Cheniere Energy: Being the first company to receive regulatory approval to export LNG from its 2.6 billion cubic feet per day Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage. The Zacks Rank #1 (Strong Buy) company is primed for significant revenue and earnings growth on the back of solid operations and long-term contracts. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Cheniere Energy’s Corpus Christi Stage 3 expansion is also progressing well, with construction 68% complete and Train 1 scheduled for initial gas introduction by the year-end. The company’s gas supply deals for its Sabine Pass and Corpus Christi projects offer excellent cash flow visibility in the coming years. Notably, over the past 60 days, the Zacks Consensus Estimate for Cheniere Energy’s 2025 earnings has moved up 10%.

Price and Consensus: LNG

Coterra Energy: It is an independent upstream operator primarily engaged in the exploration, development and production of natural gas. Headquartered in Houston, TX, the firm owns some 186,000 net acres in the gas-producing Marcellus Shale of the Appalachian Basin. The company’s share of natural gas in its overall production is around 65%.

Coterra’s expected earnings per share growth rate for three to five years is currently 30.1%, which compares favorably with the industry's growth rate of 19.4%. Valued at around $18.5 billion, Coterra Energy — carrying a Zacks Rank #3 (Hold) — has a trailing four-quarter earnings surprise of roughly 6.3%, on average.

Price and Consensus: CTRA

APA Corporation: Founded in 1954, APA Corporation is one of the world's leading independent energy companies engaged in the exploration, development and production of natural gas, crude oil and natural gas liquids. APA’s Suriname portfolio in South America is particularly exciting, where it continues to achieve significant drilling success. In the United States, the #3 Ranked upstream player mainly operates in the prolific Permian Basin.

APA beat the Zacks Consensus Estimate for earnings in two of the last four quarters and missed in the other two. It has a trailing four-quarter earnings surprise of roughly 24.9%, on average. APA has a market capitalization of some $8.8 billion and carries a Value Score of A.

Price and Consensus: APA

Magnolia Oil & Gas: The company’s asset base is centered around two highly productive regions: the Giddings Field and Karnes County, which are known for their high returns and long production life cycles. These areas are characterized by low breakeven costs and strong well performance, allowing Magnolia to generate high returns on invested capital.

Magnolia Oil & Gas has a market capitalization of about $4.6 billion. The Zacks Rank #3 company beat the Zacks Consensus Estimate for earnings in each of the last four quarters. MGY carries a Value Score of B.

Price and Consensus: MGY