The energy sector is undergoing a transformative resurgence in 2024, earmarking it as a pivotal year of financial growth. The upward trajectory is primarily fueled by soaring crude oil prices, reaching a five-month peak, largely driven by escalating geopolitical tensions in the Middle East, with the Iran-Israel situation at the fore. This has led to a palpable unease regarding the stability of oil supplies, driving prices upward.

Positive Financial Outlook for 2024

Deloitte’s analysis indicates that the energy sector has entered 2024 on a robust foundation. The environment is expected to maintain the momentum from 2023, wherein the sector saw a substantial 11% year-over-year increase in hydrocarbon investments, totaling about $580 billion.

The resurgence is mirrored in the market performance, wherein the energy sector has eclipsed all other U.S. market sectors with an 11.5% increase over the past 30 days, outpacing sectors like utilities and the broader S&P 500. This performance is a testament to the sector’s unique momentum and its critical role in the global energy landscape.

OPEC+ & Global Oil Production Dynamics

The decision by OPEC+ to continue crude oil production cuts has led to a revision of global oil production growth forecasts, indicating a potential decrease in worldwide oil stockpiles, especially in the second quarter of 2024. This can lead to higher oil prices.

Oil Price Remains High

The U.S. Energy Information Administration (EIA) aligns with the positive outlook, projecting a rise in crude oil prices through 2024, as demand is expected to outstrip supply.

At present, the West Texas Intermediate (WTI) crude price is trading above $86 per barrel, which is deemed highly beneficial for the exploration and production sector. The EIA’s short-term energy outlook remains optimistic, projecting an average spot price of $82.15 per barrel for WTI crude for 2024.

This upward trend in oil prices is fostering a bullish atmosphere, paving the way for heightened exploration and production activities, particularly in lucrative shale reserves.

3 Stocks to Consider

Given the backdrop, it is prudent to allocate money toward oil exploration and production companies. We are employing our proprietary Stock Screener to zero in on three stocks belonging to the spaces that are well-poised to gain. These three companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Diamondback Energy Inc. (FANG Quick QuoteFANG - Free Report) operates with a high degree of control over its projects, with operations primarily concentrated on the horizontal development of the Spraberry and Wolfcamp formations in the Midland Basin and the Wolfcamp and Bone Spring formations in the Delaware Basin. Both are integral parts of the larger Permian Basin area, which is one of the most prolific producing basins in the United States, characterized by a long production history.

As of the end of fiscal 2023, Diamondback’s acreage in the Permian Basin was approximately 607,877 gross acres, comprising 428,324 gross acres in the Midland Basin and 174,828 gross acres in the Delaware Basin. The company’s strategic focus includes leveraging its expertise in the Permian Basin to maximize hydrocarbon recovery, and optimize drilling and completion techniques. Higher oil prices would significantly benefit Diamondback by increasing the profitability of its hydrocarbon extraction activities.

Antero Resources Corporation (AR Quick QuoteAR - Free Report) is primarily engaged in the development, production, exploration, and acquisition of natural gas, natural gas liquids (NGLs), and oil properties located in the Appalachian Basin. As of Dec 31, 2023, Antero held 515,000 net acres in the basin, primarily in West Virginia and Ohio. The company’s business strategy leverages horizontal drilling and advanced fracture stimulation technologies to economically develop and produce resources from unconventional formations.

Additionally, Antero Resources owns a significant interest in Antero Midstream Corporation, a midstream energy company, which services its production and completion activities through various assets, including gathering systems and compression facilities. Antero Resources’ integrated operations and strategic focus on the Appalachian Basin underscore its core business activities within the energy sector. With higher oil prices, Antero Resources’ financial performance would improve due to increased revenues from natural gas and NGLs.

Viper Energy Inc. (VNOM Quick QuoteVNOM - Free Report) is primarily engaged in acquiring and owning mineral and royalty interests in oil and natural gas properties, with a focus on the Permian Basin. In 2023, significant acquisitions were made, including the acquisitions of mineral and royalty interests from GRP entities for $759.6 million and from Diamondback for $74.5 million, enhancing its assets in the Permian Basin.

By the end of 2023, Viper Energy’s assets included mineral interests and royalty interests in properties covering 1.2 million gross acres, with net production averaging 39,244 BOE/d and royalty income totaling $717.1 million. The company’s estimated proved oil and natural gas reserves were 179,249 MBOE, indicating a strong asset base and operational scale. Higher oil prices would directly benefit Viper by increasing royalty income from its oil and natural gas properties.