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3 Permian Explorers to Gain From Continued Oil Price Strength

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So far this year, West Texas Intermediate oil price has soared more than 27%. Exploration and production businesses will continue to witness gains as the crude price trajectory is expected to remain healthy.

Oil Price Still High

West Texas Intermediate crude price, trading at more than $85 per barrel, has risen drastically in the past year. Possibilities of weak global economic growth, as central banks will continue to rise interest rates, could hurt oil demand. This bearish factor will probably get outweighed by the looming winter, which could increase the demand for heating oil, supporting crude price, at least in the short run.

Shale Oil Production to Rise

In September, total oil production from shale resources in the United States will likely increase by 141,000 barrels per day to 9,049 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 79,000 barrels per day to 5,408 MBbls/D in September.

Permian Explorers in the Spotlight

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 keep an eye on stocks of companies operating in the most prolific basin.

3 Stocks to Gain

Diamondback Energy, Inc. (FANG - Free Report) is a leading pure-play Permian operator, having a solid footprint in 421,000 net acres in the prolific Midland and Delaware sub-basins. Diamondback Energy, carrying a Zacks Rank #3 (Hold), projects its oil production for 2022 to be almost flat compared with 2021 and expects its free cash flow to increase more than 90%.

The Zacks Consensus Estimate for Diamondback Energy’s earnings per share for 2022 and 2023 has been revised upward in the past seven 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 #3 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. You can see the complete list of today’s Zacks #1 Rank stocks here.

Solid oil prices are 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 3 expects total production of 36.9-38.3 million barrels of oil equivalent (MMBoE), higher than 31.5 MMBoE in 2021.

On another positive note, Matador plans to turn to sales a net of 71.2 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 >>

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