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Keep an Eye on 3 Permian Stocks as Oil Prices Remain Strong

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The pricing environment of crude oil continues to be favorable, encouraging more exploration and production activities. Upstream players may keep increasing their operations in prolific shale resources, consequently raising the count of drilling rigs. With the uptick in drilling activities, production is expected to increase, benefiting businesses involved in exploration and production.

Oil Price Still High

West Texas Intermediate crude price is trading at more than $75 per barrel, which is favorable for exploration and production activities. In its short-term energy outlook, the U.S. Energy Information Administration (“EIA”) projected the average spot price of West Texas Intermediate crude at $77.68 per barrel this year, still a handsome price for upstream operations.

Permian Oil Production to Rise

In March, total oil production from shale resources in the United States will likely increase by 20,000 barrels per day to 9,716 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 the EIA’s drilling productivity report. In the Permian, the EIA projects oil production to rise by 14,000 barrels per day to 6,085 MBbls/D next month.

Permian Explorers in the Spotlight

It is crystal clear that a favorable crude pricing scenario is backing higher production volumes. Improving Permian production amid healthy oil prices raised the incentive to keep an eye on companies like Exxon Mobil Corporation (XOM - Free Report) , Matador Resources Company (MTDR - Free Report) and Diamondback Energy, Inc. (FANG - Free Report) , operating in the most prolific basin. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

3 Stocks to Gain

ExxonMobil has solid upstream businesses. In the Permian Basin, ExxonMobil has a solid pipeline of profitable projects. To strengthen its presence in the Permian further, ExxonMobil entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources (PXD). This is because Pioneer Natural is one of the foremost oil producers operating in the Permian Basin. With the deal closure expected in the first half of 2024, Permian production of the integrated energy major will increase significantly.

Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. The exploration and production company is likely to continue witnessing increased production volumes. FANG also has an investment-grade balance sheet.

Matador Resources has a strong presence in the oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. In the sub-basin of the broader Permian, the company has a vast inventory of drilling areas that will back the exploration and production company’s production volumes.

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