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Oil Again Crosses $80: 3 Upstream Players to Gain

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The business environment for exploration and production activities has recovered massively, with oil prices skyrocketing over the past few days. In other words, the developments are aiding the prospects of upstream energy players.

Oil Price Surges

The price of West Texas Intermediate (WTI) crude is hovering around the $80 per barrel mark. Since almost mid-March, the commodity’s price has surged more than 90%. The recent rise has stemmed from the surprise decision of OPEC and its allies, including Russia, to cut crude production.

The cartel, known as OPEC+, has decided to cut its production target by an additional 1.16 million barrels per day (bpd). This is a precautionary measure, as described by the group, in order to support oil prices amid increasing oil stockpiles and a weakening economy.

Most analysts are bullish on crude price, reflecting that the pricing environment will remain healthy. Handsome oil price will probably aid explorers and producers to continue returning to oil resources, which in turn will increase production.

3 Stocks to Gain

Hence it is high time for investors to keep an eye on upstream energy players with a strong presence in prolific resources. We have zeroed in on three stocks, each carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Favorable oil prices are a boon for Matador Resources Company’s (MTDR - Free Report) upstream operations. It has a strong presence in oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Promising oil price is likely to aid it in increasing production volumes. Matador agreed to acquire Advance Energy Partners Holdings, LLC, which comprises several oil and natural gas-producing properties and undeveloped acreage. Once the deal closes, MTDR expects the acquisition to be accretive to important valuation and financial metrics.

Pioneer Natural Resources Company  has a strong presence in the low-cost oil-rich Midland basin — a sub-basin of the broader Permian. The upstream energy player has a massive inventory of premium wells that will likely generate significant returns.

Pioneer Natural is focused on returning capital to shareholders. This includes a substantial variable dividend and 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 its strong balance sheet on which the firm can rely to sail through the volatile energy businesses.

Diamondback Energy, Inc. (FANG - Free Report) is a leading pure-play Permian operator. FANG expanded its footprint in the Midland basin since it acquired all leasehold interest and associated properties of Lario Permian, LLC — a wholly-owned affiliate of Lario Oil & Gas Company. FANG also has an investment-grade balance sheet.


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