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Permian Oil Explorers in the Spotlight: 3 Stocks to Bet On

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Oil prices have returned to glorious days. This is resulting in growth for the exploration and production businesses, in turn, leading the energy sector back to life.

Oil Price Surges

The price of West Texas Intermediate crude, trading at more than $110 per barrel, has improved drastically over the past year. The significant rise in oil price is owing to conflict and geopolitical muscle-flexing between Russia and Ukraine.

Oil prices are expected to remain in the bullish territory, and aid explorers and producers in adding rigs in the shale plays. In the Permian, the most prolific basin in the United States, the count of oil rigs in the week ended Mar 18 was 315, significantly higher than 292 in the week through Jan 7, 2022, per the weekly rig count report issued by Baker Hughes Company (BKR - Free Report) . The rotary rig count, issued by Baker Hughes, usually gets published in major newspapers and trade publications.

Baker Hughes’ data, issued at the end of every week since 1944, helps energy service providers gauge the overall environment of the oil and gas industry. The number of active rigs and its comparison with the prior-week figure indicate the demand trajectory for Baker Hughes’ oilfield services from exploration and production companies.

EIA Expects Rise in US Shale Oil Production

In April, the total production of oil from shale resources in the United States will likely increase 117,000 barrels per day to 8,708 thousand barrels per day (MBbl/D), per the U.S. Energy Information Administration (“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 an oil production increase of 70,000 barrels per day to 5,208 MBbls/D for April.

Permian Explorers Set to Gain

Considering that Permian explorers are adding oil rigs and the region's production are likely to grow amid the favorable crude pricing scenario, it is high time to bet on the upstream players in the basin.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. Two companies currently sport a Zacks Rank #1 (Strong Buy), whereas one carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

EOG Resources, Inc. (EOG - Free Report) , a leading oil and natural gas exploration and production company, is well-placed to capitalize on the crude rally. Among the premium plays where EOG Resources is planning to allocate a significant amount of its capital spending is Delaware — a sub-basin of the broader Permian.

In 2022, EOG Resources, currently with a Zacks Rank #2, will remain focused to complete a significant number of wells. Notably, over the past 30 days, EOG has witnessed upward earnings per share estimate revisions for 2022.

Exxon Mobil Corporation (XOM - Free Report) will bank on its solid pipeline of lucrative projects in the Permian. ExxonMobil, with a Zacks Rank of 1, is expected to generate handsome returns from its low-cost operations in the basin.

In the Permian operation, XOM is planning to achieve net-zero greenhouse gas emissions by 2030. Notably, for 2022 and 2023, ExxonMobil has witnessed upward earnings estimate revisions over the past 30 days. 

In the Permian, Chevron Corporation (CVX - Free Report) is also a leading oil producer. Most analysts believe that Permian will continue to drive Chevron’s production in the coming quarters. The low cost of operation is one of the benefits of CVX’s operation in the Permian. 

Chevron, with a Zacks Rank of 1, is likely to witness earnings growth of 57.4% in 2022. CVX has witnessed upward earnings estimate revisions for 2023 over the past 30 days.