Investors got a brief idea on how key energy firms have fared in the recently concluded second quarter from the earnings announcements of Exxon Mobil Corporation (XOM Quick QuoteXOM - Free Report) and Chevron Corporation (CVX Quick QuoteCVX - Free Report) . With oil price improving remarkably, the upstream business of energy giants is likely to have gained in the June quarter.

Oil Price Surge

The price of West Texas Intermediate crude improved more than 20% in the June quarter of this year. In comparison with the year-ago quarter, the commodity price has improved drastically. The improvement scale can be represented as a price surge from the pandemic-hit low — when oil was in the negative territory — in April 2020, breaking the psychological barrier of $70 per barrel.

The significant improvement in the commodity pricing scenario was backed by the optimism that fuel demand will recover considerably this year, thanks to the rolling out of coronavirus vaccines at a massive scale.

Rise in U.S. Rig Tally

A favorable crude pricing environment convinced explorers and producers to return to shale plays despite slowing down of drilling activities, as upstream players are focusing mainly on stockholder returns rather than boosting output.

Per data from Baker Hughes Company (BKR Quick QuoteBKR - Free Report) , the tally for oil drilling rigs in the United States for the week through Jun 25 was 372, improving from 337 for the week through Apr 1. In comparison to the June quarter of 2020, the market witnessed a steady decline in the count. From the tally of 562 for the week through Apr 3, 2020, the count of oil drilling rigs plummeted to 188 for the week through Jun 26, 2020.

Quarterly Earnings to Turnaround

Amid the backdrop of increased oil prices and higher drilling activities, upstream energy companies are likely to have generated handsome earnings in the second quarter of this year. In addition, rolling out of coronavirus vaccines is likely to have aided energy companies’ refining operations. This is because, as compared to the prior-year equivalent quarter, more people have socialized and gone to work. Per the latest Zacks Earnings Trends report, the energy sector is likely to generate earnings of $15.4 billion for the June-end quarter of this year, indicating a turnaround from a loss of $9.6 billion in the prior-year period.

Key Releases

Given the backdrop, let us take a look at how the following three energy companies are placed ahead of their second-quarter earnings releases slated for Aug 3.

Our proprietary model clearly indicates that a company needs to have the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — to increase the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Devon Energy Corp. (DVN Quick QuoteDVN - Free Report) is geared up to release quarterly results, after the closing bell.

Our proven model predicts an earnings beat for the leading oil and gas producer this time around, as it has an Earnings ESP of +0.15% and a Zacks Rank #1.

Phillips 66 (PSX Quick QuotePSX - Free Report) is set to report quarterly earnings before the opening bell. The chances of the refining player delivering an earnings beat this time around are low, as it has an Earnings ESP of -21.00% and a Zacks Rank #4 (Sell).

ConocoPhillips (COP Quick QuoteCOP - Free Report) is scheduled to report quarterly earnings before the opening bell. Similar to Phillips 66, the chances of this upstream energy company delivering an earnings beat this time around are low, as it has an Earnings ESP of 0.00% and a Zacks Rank #1.