Back to top

Permian Has More Oil Than Thought: 4 Stocks Worth Tracking

Read MoreHide Full Article

Energy investors should make merry as the most prolific oil basin in the United States has more crude reserves to offer than what was thought. For years, Permian Basin has been contributing to the nation’s oil production boom and has lifted America to the position of net oil exporter after 75 long years.

Per a notification by Chevron Corporation (CVX - Free Report) , the largest oil fields in America are all centered in the Permian Basin. The basin holds more than 20 of the best 100 crude-producing fields in the domestic market.

However, by Permian, we mainly mean its sub-basin Midland which is broadly known and mostly drilled. Delaware, the other sub-basin, has far higher oil and gas resource bases, claimed U.S. Geological Survey (USGS). The news definitely reflects further production growth potential for the leading U.S. drillers operating in the broader Permian, specifically Delaware.

Permian Backs US to Energy Independence

Considering U.S. Energy Information Administration’s (EIA) chart for the nation’s field production of crude oil, it has been a clear picture that America has managed to boost oil production in the past decade. EIA data showed that from 158,566 thousand barrels of oil volumes since January 2008, the United States has more than doubled its crude output to 344,239 thousand barrels, as of September 2018.

Among the prolific domestic oil and gas producing regions — Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian — Permian’s contribution has been the highest to America’s massive oil production growth. EIA claimed that Permian's crude production has dramatically increased from below 1,000 thousand barrels a day, through entire 2009, to 3,632 thousand barrels a day in November 2018.

Investors should know that the advent of technologies like horizontal drilling and hydraulic fracturing are primarily aiding Permian to back President Donald Trump’s policy of making America energy-independent.

Permian Has More Oil to Offer

USGS claimed that Delaware’s resources base contains more than double the volumes of oil in the Midland. According to the latest USGS estimation, the Bone Spring rock formations and the Wolfcamp shale in the Delaware sub-basin have 46.3 billion barrel of oil reserves and 281 trillion cubic feet of natural gas.

Importantly, the estimated natural gas reserves are 18 times more the amount of gas in the Midland sub-basin, added USGS.

Delaware Drillers in the Spotlight

Given that the Delaware sub-basin (the new Permian) has significantly more oil resources than Midland (the old Permian), prospects for upstream energy players with presence in the new Permian are bright. We would want investors to keep a track of the following Delaware drillers or continue to hold them if they are already part of their portfolio. Each of the stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in Houston, TX, EOG Resources, Inc. (EOG - Free Report) has as high as 4,815 net undrilled premium locations in the Delaware sub-basin, reflecting scope for production growth.

Devon Energy Corporation (DVN - Free Report) , headquartered in Oklahoma City, has been ramping up activities in the new Permian. The average well productivity of the company in the resource is touching new records. Devon expects oil production to grow 42% through 2018 in the Delaware sub-basin, higher than 30% growth in 2017.

Mounting inventories of Occidental Petroleum Corporation (OXY - Free Report) — headquartered in Houston, TX — in Delaware’s Bone Springs formations and Wolfcamp play will likely help the company meet its target of 30% to 35% of compound annual production growth rate (CAGR) in the Permian from 2016 to 2019.

Diamondback Energy, Inc. (FANG - Free Report) , headquartered in Midland, TX, has significantly expanded its total net acreage position in the broader Permian. The company’s prime focus is on Delaware’s Wolfcamp and Bone Spring formations. Investors should know that the company’s 7,200 net horizontal drilling areas, spreading across the Midland and Delaware basins, will likely boost production.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>



More from Zacks Analyst Blog

You May Like