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Why Investors May Want to Buy These 4 US E&P Stocks Now
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The Zacks Oil and Gas - Exploration and Production - United States industry remains in a favorable position as higher oil prices, tight global supply and geopolitical uncertainty continue to support earnings. Stronger commodity realizations are helping producers generate healthy cash flows, improve margins and maintain shareholder returns. At the same time, companies have become more disciplined. Lower breakevens, better drilling efficiency, and tighter capital spending are making the industry more resilient than in the past cycles. While high prices can eventually pressure demand and create volatility, the overall setup still looks constructive. The industry continues to outperform the broader market, and its strong Zacks rank suggests solid near-term prospects. Valuations also remain reasonable compared with the S&P 500, leaving room for further upside if commodity prices stay supportive. As a result, investors may want to invest in names like Diamondback Energy (FANG - Free Report) , Permian Resources (PR - Free Report) , Chord Energy (CHRD - Free Report) and Magnolia Oil & Gas (MGY - Free Report) .
About the Industry
The Zacks Oil and Gas - US E&P industry consists of companies primarily based in the domestic market and 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
Strong Price Environment Supports Cash Flows: Oil prices have surged to triple digits, driven by geopolitical tensions and supply disruptions. Even if tensions ease, prices may remain elevated due to lingering infrastructure damage and tight supply conditions. This creates a supportive backdrop for producers, enabling stronger cash flows, improved margins, and sustained capital returns. The industry is well-positioned to benefit from this pricing strength, especially as higher prices tend to persist longer than they rise.
Structural Supply Constraints Create a Price Floor: Global spare capacity is declining while supply risks remain elevated due to geopolitical uncertainty and potential disruptions in key transit routes. Even temporary relief measures, like strategic reserve releases, only provide short-term support. With limited buffers in the system, the market is increasingly vulnerable to shortages, which strengthens the long-term price outlook. This environment favors U.S. producers that can respond with relatively flexible production and capture higher realizations.
High Prices Risk Demand Destruction and Economic Slowdown: While rising oil prices boost revenues, they also increase fuel costs for consumers and businesses. Once gasoline prices cross key thresholds, demand can weaken as driving and spending decline. Sustained high oil prices could also slow global economic growth, with extreme levels posing broader risks to demand. This creates a natural ceiling for prices and introduces volatility, which can limit the durability of the upcycle for the industry.
Cost Discipline and Efficiency Improve Resilience: The industry has become more capital disciplined, focusing on efficiency gains, lower breakevens, and consistent free cash flow generation rather than aggressive production growth. Improvements in drilling techniques, longer laterals, and operational optimization have reduced costs over time. This allows producers to remain profitable even at moderate prices, while benefiting significantly when prices rise—making the sector structurally more resilient across cycles.
Zacks Industry Rank Indicates Positive 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 #50, which places it in the top 21% 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 fairly strong 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.
Considering the encouraging dynamics 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 Outperforms S&P 500 but Lags Sector
The Zacks Oil and Gas - US E&P industry has fared better than the Zacks S&P 500 composite, though it has underperformed the broader Zacks Oil - Energy Sector over the past year.
The industry has moved up 25.4% over this period against the broader sector’s increase of 36.4%. Meanwhile, the S&P 500 has gained some 16%.
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 12.74X, lower than the S&P 500’s 16.52X. It is, however, well above the sector’s trailing 12-month EV/EBITDA of 6.97X.
Over the past five years, the industry has traded as high as 16.21X and as low as 3.52X, with a median of 6.62X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio (Past Five Years)
4 Stocks to Buy
Chord Energy: Chord Energy is a Houston-based E&P company focused entirely on the Williston Basin. Formed in 2022, it produces crude oil, natural gas liquids and natural gas from a large, high-quality acreage position. The Zacks Rank #1 (Strong Buy) company is primarily oil-weighted and benefits from a deep inventory of low-cost drilling locations.
Chord follows a disciplined strategy built on efficient operations and careful capital allocation. Its strong balance sheet provides flexibility across commodity cycles, while steady free cash flow supports dividends and share buybacks. Backed by technical expertise and scale, Chord Energy aims to deliver consistent production and shareholder returns over time.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 26.2% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Chord Energy’s 2026 earnings has moved up from $4.10 per share to $12.03.
Price and Consensus: CHRD
Magnolia Oil & Gas: It is a Houston-based E&P company with operations in South and East Texas. Its core assets lie in the Eagle Ford Shale and the Giddings area, supported by a sizable acreage position in the Austin Chalk. The Zacks #1 Ranked company maintains a balanced production mix of oil, natural gas liquids and gas, while keeping a strong focus on oil-driven output.
Magnolia follows a disciplined approach to growth, combining steady production gains with careful capital spending. Efficient drilling, consistent operations and a stable rig program support margins and cash flow. With a strong balance sheet and low debt, Magnolia prioritizes returning cash to its shareholders through dividends and buybacks.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 27.9% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Magnolia’s 2026 earnings has moved up from $1.44 per share to $2.29.
Price and Consensus: MGY
Diamondback Energy: Diamondback Energy — carrying a Zacks Rank #2 (Buy) — is a Texas-based independent oil and gas company headquartered in Midland. It focuses on acquiring, developing and producing unconventional reserves in the Permian Basin, particularly across the Midland and Delaware sub-basins. With a large acreage position in core areas, Diamondback remains one of the more oil-focused producers in the United States.
Its operations target key formations such as Wolfcamp, Spraberry and Bone Spring using horizontal drilling and modern completion techniques. A strong inventory of high-quality assets supports long-term growth. Backed by a disciplined capital approach and a solid balance sheet, Diamondback aims to deliver steady production and attractive returns over time.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 11.3% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Diamondback’s 2026 earnings has moved up from $8.81 per share to $14.88.
Price and Consensus: FANG
Permian Resources: Permian Resources is a Midland-based E&P company focused entirely on the Permian Basin. Its operations are concentrated in the Delaware and Midland sub-basins, with a strong presence in core areas across Texas and New Mexico. The #2 Ranked company primarily develops unconventional resources in formations like Wolfcamp and Bone Spring, supported by a large acreage position and oil-weighted production mix.
Permian Resources combines scale with cost efficiency, positioning itself as one of the lowest-cost producers in the Delaware Basin. A disciplined approach to acquisitions and development supports steady output and strong cash flow. With a solid balance sheet and long inventory life, Permian Resources focuses on delivering consistent returns to its shareholders.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 16.8% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Permian Resources’ 2026 earnings has moved up from 97 cents per share to $1.67.
Price and Consensus: PR
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Why Investors May Want to Buy These 4 US E&P Stocks Now
The Zacks Oil and Gas - Exploration and Production - United States industry remains in a favorable position as higher oil prices, tight global supply and geopolitical uncertainty continue to support earnings. Stronger commodity realizations are helping producers generate healthy cash flows, improve margins and maintain shareholder returns. At the same time, companies have become more disciplined. Lower breakevens, better drilling efficiency, and tighter capital spending are making the industry more resilient than in the past cycles. While high prices can eventually pressure demand and create volatility, the overall setup still looks constructive. The industry continues to outperform the broader market, and its strong Zacks rank suggests solid near-term prospects. Valuations also remain reasonable compared with the S&P 500, leaving room for further upside if commodity prices stay supportive. As a result, investors may want to invest in names like Diamondback Energy (FANG - Free Report) , Permian Resources (PR - Free Report) , Chord Energy (CHRD - Free Report) and Magnolia Oil & Gas (MGY - Free Report) .
About the Industry
The Zacks Oil and Gas - US E&P industry consists of companies primarily based in the domestic market and 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
Strong Price Environment Supports Cash Flows: Oil prices have surged to triple digits, driven by geopolitical tensions and supply disruptions. Even if tensions ease, prices may remain elevated due to lingering infrastructure damage and tight supply conditions. This creates a supportive backdrop for producers, enabling stronger cash flows, improved margins, and sustained capital returns. The industry is well-positioned to benefit from this pricing strength, especially as higher prices tend to persist longer than they rise.
Structural Supply Constraints Create a Price Floor: Global spare capacity is declining while supply risks remain elevated due to geopolitical uncertainty and potential disruptions in key transit routes. Even temporary relief measures, like strategic reserve releases, only provide short-term support. With limited buffers in the system, the market is increasingly vulnerable to shortages, which strengthens the long-term price outlook. This environment favors U.S. producers that can respond with relatively flexible production and capture higher realizations.
High Prices Risk Demand Destruction and Economic Slowdown: While rising oil prices boost revenues, they also increase fuel costs for consumers and businesses. Once gasoline prices cross key thresholds, demand can weaken as driving and spending decline. Sustained high oil prices could also slow global economic growth, with extreme levels posing broader risks to demand. This creates a natural ceiling for prices and introduces volatility, which can limit the durability of the upcycle for the industry.
Cost Discipline and Efficiency Improve Resilience: The industry has become more capital disciplined, focusing on efficiency gains, lower breakevens, and consistent free cash flow generation rather than aggressive production growth. Improvements in drilling techniques, longer laterals, and operational optimization have reduced costs over time. This allows producers to remain profitable even at moderate prices, while benefiting significantly when prices rise—making the sector structurally more resilient across cycles.
Zacks Industry Rank Indicates Positive 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 #50, which places it in the top 21% 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 fairly strong 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.
Considering the encouraging dynamics 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 Outperforms S&P 500 but Lags Sector
The Zacks Oil and Gas - US E&P industry has fared better than the Zacks S&P 500 composite, though it has underperformed the broader Zacks Oil - Energy Sector over the past year.
The industry has moved up 25.4% over this period against the broader sector’s increase of 36.4%. Meanwhile, the S&P 500 has gained some 16%.
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 12.74X, lower than the S&P 500’s 16.52X. It is, however, well above the sector’s trailing 12-month EV/EBITDA of 6.97X.
Over the past five years, the industry has traded as high as 16.21X and as low as 3.52X, with a median of 6.62X.
Trailing 12-Month Enterprise Value-to EBITDA (EV/EBITDA) Ratio (Past Five Years)
4 Stocks to Buy
Chord Energy: Chord Energy is a Houston-based E&P company focused entirely on the Williston Basin. Formed in 2022, it produces crude oil, natural gas liquids and natural gas from a large, high-quality acreage position. The Zacks Rank #1 (Strong Buy) company is primarily oil-weighted and benefits from a deep inventory of low-cost drilling locations.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Chord follows a disciplined strategy built on efficient operations and careful capital allocation. Its strong balance sheet provides flexibility across commodity cycles, while steady free cash flow supports dividends and share buybacks. Backed by technical expertise and scale, Chord Energy aims to deliver consistent production and shareholder returns over time.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 26.2% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Chord Energy’s 2026 earnings has moved up from $4.10 per share to $12.03.
Price and Consensus: CHRD
Magnolia Oil & Gas: It is a Houston-based E&P company with operations in South and East Texas. Its core assets lie in the Eagle Ford Shale and the Giddings area, supported by a sizable acreage position in the Austin Chalk. The Zacks #1 Ranked company maintains a balanced production mix of oil, natural gas liquids and gas, while keeping a strong focus on oil-driven output.
Magnolia follows a disciplined approach to growth, combining steady production gains with careful capital spending. Efficient drilling, consistent operations and a stable rig program support margins and cash flow. With a strong balance sheet and low debt, Magnolia prioritizes returning cash to its shareholders through dividends and buybacks.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 27.9% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Magnolia’s 2026 earnings has moved up from $1.44 per share to $2.29.
Price and Consensus: MGY
Diamondback Energy: Diamondback Energy — carrying a Zacks Rank #2 (Buy) — is a Texas-based independent oil and gas company headquartered in Midland. It focuses on acquiring, developing and producing unconventional reserves in the Permian Basin, particularly across the Midland and Delaware sub-basins. With a large acreage position in core areas, Diamondback remains one of the more oil-focused producers in the United States.
Its operations target key formations such as Wolfcamp, Spraberry and Bone Spring using horizontal drilling and modern completion techniques. A strong inventory of high-quality assets supports long-term growth. Backed by a disciplined capital approach and a solid balance sheet, Diamondback aims to deliver steady production and attractive returns over time.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 11.3% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Diamondback’s 2026 earnings has moved up from $8.81 per share to $14.88.
Price and Consensus: FANG
Permian Resources: Permian Resources is a Midland-based E&P company focused entirely on the Permian Basin. Its operations are concentrated in the Delaware and Midland sub-basins, with a strong presence in core areas across Texas and New Mexico. The #2 Ranked company primarily develops unconventional resources in formations like Wolfcamp and Bone Spring, supported by a large acreage position and oil-weighted production mix.
Permian Resources combines scale with cost efficiency, positioning itself as one of the lowest-cost producers in the Delaware Basin. A disciplined approach to acquisitions and development supports steady output and strong cash flow. With a solid balance sheet and long inventory life, Permian Resources focuses on delivering consistent returns to its shareholders.
The Zacks Consensus Estimate for the company’s 2026 earnings per share indicates 16.8% year-over-year growth. Over the past 60 days, the Zacks Consensus Estimate for Permian Resources’ 2026 earnings has moved up from 97 cents per share to $1.67.
Price and Consensus: PR