Investors are not worried over the Omicron variant of coronavirus, with West Texas Intermediate crude trading at the highest mark in more than three weeks. Hence, crude oil exploration and production companies are in the spotlight again.
Oil Price Surges
West Texas Intermediate crude price is trading above $72 per barrel, highlighting a substantial improvement from the negative territory hit last April. Since Dec 20, the commodity's price improved more than 6%, thanks to the decline in crude inventories. According to the U.S. Energy Information Administration (EIA), crude oil stocks declined by 4.7 million barrels in the week through Dec 17.
Fading Omicron worries, as reflected in increasing home sales and consumer confidence, have also been backing the surge in crude price.
EIA Expects Rise in US Shale Oil Production
In January 2022, total oil production from shale resources in the United States will likely increase by 96,000 barrels per day to 8,438 thousand barrels per day (MBbl/D), per EIA. The shale resources comprise Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.
Of all the resources, Permian will witness the highest increase in daily oil production next month, according to EIA’s drilling productivity report. In the Permian, EIA projects oil production to rise by 71,000 barrels per day to 5,031 MBbls/D in January 2022.
Time to Bet on Permian Explorers
Higher drilling activities are backing the increasing production in Permian. In its
weekly release, Baker Hughes Company (BKR) reported that the most prolific basin's oil drilling rigs increased in 17 of the last 19 weeks.
Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall business environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week tally indicates the trajectory of demand for Baker Hughes’ oilfield services from exploration and production companies.
Thus, improving productivity in the Permian amid a favorable crude pricing environment has raised the incentive for keeping a close watch on the stocks of companies operating in the basin.
3 Stocks to Gain
Since selecting the right companies with a footprint in the Permian from the stock universe is not an easy task, we are employing our proprietary
Stock Screener to zero down on three prospective stocks. One of the stocks sports a Zacks Rank #1 (Strong Buy), while two carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here . PDC Energy, Inc. ( PDCE Quick Quote PDCE - Free Report) is focusing on significant value creation with a strong presence in the Delaware Basin – a sub-basin of Permian – where the company’s operations spread across roughly 25,000 net acres. PDC Energy has done pretty well this year despite the coronavirus pandemic and is projecting 2021 free cash flow of more than $900 million.
PDC Energy, sporting a Zacks Rank #1 (Strong Buy), also focuses on debt reduction. In order to strengthen its balance sheet further, PDC Energy is anticipating reducing its debt load by more than 40% in 2021.
Headquartered in Dallas, TX,
Matador Resources Company ( MTDR Quick Quote MTDR - Free Report) has a strong footprint in the liquid-rich Delaware Basin’s Wolfcamp and Bone Spring plays. The Zacks #3 Ranked company has been ramping up production while delivering robust well results across the prolific basin – a sub-basin of the broader Permian.
Matador Resources expects total oil equivalent production to increase 13% in 2021, securing handsome cashflows amid improving oil price. The positives are getting reflected in the impressive pricing scenario of Matador Resources. So far this year, MTDR has gained 209.5%, outpacing the 96.2% jump of the composite stocks belonging to the industry.
EOG Resources, Inc. ( EOG Quick Quote EOG - Free Report) is among the leading upstream energy players with operations focused on prolific plays, including Delaware, a Permian sub-basin. In Delaware, EOG Resources has significant undrilled premium locations, brightening the production outlook. Hence, healthy oil prices and higher production will aid EOG’s bottom line.
The Zacks Consensus Estimate for #3 Ranked EOG Resources’ earnings per share for 2021 has been revised upward in the past 30 days to $8.79, suggesting a year-over-year improvement of 502.1%.