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Boost Your Portfolio With These 3 Permian Explorers

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So far this year, West Texas Intermediate oil price has improved more than 54%. Exploration and production businesses are thus witnessing significant gains on the back of a healthy crude price trajectory, with the energy sector already sprung back to life.

High Oil Price

West Texas Intermediate crude price, trading at more than $115 per barrel, has risen drastically in the past year. The significant rise in oil prices can be attributed to analysts’ assumptions that the Ukraine war may be prolonged. 

The recent surge in the commodity price is backed by the news that an accord has recently been reached by the European Union (EU) leaders to ban 90% of Russian crude. Thus, the EU will impose its harshest sanctions yet on Russia.

U.S. Shale Oil Production to Rise

In June, total oil production from shale resources in the United States will likely increase by 142,000 barrels per day to 8,761 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 this month, according to the EIA’s drilling productivity report. In the Permian, the EIA projects oil production to rise by 88,000 barrels per day to 5,219 MBbls/D in June.

Time to Bet on Permian Explorers

It has been crystal clear that a favorable crude pricing scenario is backing higher production volumes. Improving Permian production amid healthy oil prices has raised the incentive to add stocks of companies operating in the most prolific basin.

3 Stocks to Buy Right Away

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

Diamondback Energy, Inc. (FANG - Free Report) is a leading pure-play Permian operator, having a solid footprint in 423,000 net acres in the prolific Midland and Delaware sub-basins. Zacks #2 Ranked Diamondback Energy is guiding its oil production for 2022 almost flat compared with 2021 and is expecting its free cash flow to increase more than 49% this year.

The Zacks Consensus Estimate for Diamondback Energy’s earnings per share for 2022 and 2023 has been revised upward in the past 30 days.

Pioneer Natural Resources Company (PXD - Free Report) has a strong presence in the low-cost oil-rich Midland basin — a sub-basin of the broader Permian. The #2 Ranked upstream energy player has a massive inventory of premium wells that will likely generate significant returns for the company.

Pioneer Natural is focused on returning capital to shareholders. This includes a substantial variable dividend along with a strong base dividend. PXD is also employing opportunistic share repurchases to reward shareholders.

Pioneer Natural has considerably lower exposure to debt capital than the composite stocks belonging to the industry. This reflects PXD’s strong balance sheet on which the firm can rely to sail through the volatile energy businesses. 

Improving oil prices is a boon for Matador Resources Company’s (MTDR - Free Report) upstream operations. This is because MTDR has a strong presence in oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Favorable oil price is likely to aid it in increasing production volumes. For 2022, the upstream energy player with a Zacks Rank of 1 expects total production at 37,300 thousand barrels of oil equivalent (MBoE), higher than 31,454 MBoE in 2021. In fact, since 2019, total production has been increasing persistently, contributing to the top and the bottom line.

On another positive note, Matador plans to turn to sales a net of 69.7 wells this year, including operated and non-operated wells. Among the prime priorities that MTDR has set for this year are lowering debt levels, delivering free cashflows and maintaining or increasing dividends.


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Pioneer Natural Resources Company (PXD) - free report >>

Diamondback Energy, Inc. (FANG) - free report >>

Matador Resources Company (MTDR) - free report >>