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Oil Remains Above $100: Are Permian Stocks a Smart Bet Now?
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Key Takeaways
WTI stays above $100 amid Middle East tensions, keeping Permian trio FANG, XOM and CVX in the spotlight.
EIA projects Permian crude at 6.63MM bpd this year vs. 6.58MM last year, a tailwind for FANG, XOM and CVX.
FANG cites 8,854 Permian sites; XOM says proppant lifts recovery up to 20%; CVX says fewer rigs boost volumes.
Oil prices have been making newspaper headlines, as the Iran war shock has pushed commodity prices back toward their glory days. Although the tensions have made the stock market highly uncertain, energy stocks have retained their appeal. Is it time to bet on stocks such as Diamondback Energy, Inc. (FANG - Free Report) , Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) ?
High Oil Price to Aid Permian Producers?
West Texas Intermediate (“WTI”) crude is trading at more than the $100-per-barrel mark. The high prices are being driven by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $85.68 per barrel this year, higher than $65.40 last year. A highly favorable pricing environment for the commodity is likely to continue supporting exploration and production activities.
In this regard, the upstream players that are operating in the Permian, the most prolific basin in the United States, are likely to continue to gain from the ongoing strength in oil prices. In the outlook, EIA estimated that total crude oil production in the Permian would be 6.63 million barrels per day this year, higher than 6.58 million barrels per day last year.
Thus, with high prices of the commodity, production will likely increase in the most prolific basin, aiding the bottom lines of explorers and producers operating in the basin.
3 Permian Players in the Spotlight
Diamondback Energyis a well-known name among pure-play Permian players. In the prolific basin, FANG has a huge and high-quality drilling site, with the company estimating it at roughly 8,854 gross locations. The upstream energy major mentioned that those wells are economical even if the price of oil fell to $50 per barrel. Thus, with premium drilling inventories and an investment-grade balance sheet, Diamondback Energy, sporting a Zacks Rank #1 (Strong Buy), is likely to capitalize on the ongoing strength of oil prices.
ExxonMobilhas a strong footprint in the Permian and is among the advantageous assets that the energy major believes will contribute to its long-term production growth. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries by up to as much as 20%. With the acquisition of Pioneer Natural Resources in 2024, XOM enhanced its footprint in the basin, further strengthening its production outlook while realizing significant cost synergies. Thus, XOM, with a Zacks Rank of 1, is also well poised to gain like FANG. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron also has a strong footprint in the Permian. CVX mentioned that it has an interest in one of every five wells in the most prolific basin. Over the years, while growing its operations in Permian, Zacks #1 Ranked CVX has been able to generate more production while employing lower capital spending, thanks to advanced drilling techniques. Chevron added that to increase its oil and gas volumes, it is now employing significantly fewer rigs. Thus, like XOM and FANG, CVX is also strongly placed now.
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Oil Remains Above $100: Are Permian Stocks a Smart Bet Now?
Key Takeaways
Oil prices have been making newspaper headlines, as the Iran war shock has pushed commodity prices back toward their glory days. Although the tensions have made the stock market highly uncertain, energy stocks have retained their appeal. Is it time to bet on stocks such as Diamondback Energy, Inc. (FANG - Free Report) , Exxon Mobil Corporation (XOM - Free Report) and Chevron Corporation (CVX - Free Report) ?
High Oil Price to Aid Permian Producers?
West Texas Intermediate (“WTI”) crude is trading at more than the $100-per-barrel mark. The high prices are being driven by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $85.68 per barrel this year, higher than $65.40 last year. A highly favorable pricing environment for the commodity is likely to continue supporting exploration and production activities.
In this regard, the upstream players that are operating in the Permian, the most prolific basin in the United States, are likely to continue to gain from the ongoing strength in oil prices. In the outlook, EIA estimated that total crude oil production in the Permian would be 6.63 million barrels per day this year, higher than 6.58 million barrels per day last year.
Thus, with high prices of the commodity, production will likely increase in the most prolific basin, aiding the bottom lines of explorers and producers operating in the basin.
3 Permian Players in the Spotlight
Diamondback Energyis a well-known name among pure-play Permian players. In the prolific basin, FANG has a huge and high-quality drilling site, with the company estimating it at roughly 8,854 gross locations. The upstream energy major mentioned that those wells are economical even if the price of oil fell to $50 per barrel. Thus, with premium drilling inventories and an investment-grade balance sheet, Diamondback Energy, sporting a Zacks Rank #1 (Strong Buy), is likely to capitalize on the ongoing strength of oil prices.
ExxonMobilhas a strong footprint in the Permian and is among the advantageous assets that the energy major believes will contribute to its long-term production growth. In the Permian, the integrated giant has been employing lightweight proppant technology and hence has been capable of boosting its well recoveries by up to as much as 20%. With the acquisition of Pioneer Natural Resources in 2024, XOM enhanced its footprint in the basin, further strengthening its production outlook while realizing significant cost synergies. Thus, XOM, with a Zacks Rank of 1, is also well poised to gain like FANG. You can see the complete list of today’s Zacks #1 Rank stocks here.
Chevron also has a strong footprint in the Permian. CVX mentioned that it has an interest in one of every five wells in the most prolific basin. Over the years, while growing its operations in Permian, Zacks #1 Ranked CVX has been able to generate more production while employing lower capital spending, thanks to advanced drilling techniques. Chevron added that to increase its oil and gas volumes, it is now employing significantly fewer rigs. Thus, like XOM and FANG, CVX is also strongly placed now.