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4 Shale Stocks to Buy as Oil Price Nears Pre-Pandemic Mark

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Oil is spurting toward the pre-coronavirus mark and most analysts see this as an earlier-than-expected rebound. With vaccines rolling out at a massive scale, the fuel demand outlook is positive since more people will now travel for work and leisure. In fact, some analysts expect oil demand to exceed supply this year, giving investors reasons to reallocate money to the energy space.

Oil Near Pre-Pandemic Level

The price of West Texas Intermediate crude (WTI), which is trading above $58 per barrel, has improved significantly since April 2020, when oil was in the negative territory. Notably, the price of WTI crude oil, approaching the pre-pandemic mark of $60 per barrel, recently touched a 13-month high mark of $58.76 and rose for eight successive sessions.

The momentum is likely to continue since the coronavirus vaccine rollout will possibly help the economy recover strongly this year, aiding fuel demand. Supply cut by crude oil producers, with the world's biggest oil exporter Saudi Arabia cutting an additional 1 million barrels of crude production every day in February and March unilaterally, is aiding the crude price rally as well.

Explorers Returning to Shale Plays

Notably, in its weekly release, Baker Hughes Company (BKR) reported that the count of rigs engaged in exploration and production of oil and natural gas in the United States was 392 for the week through Feb 5 versus the prior-week count of 384.

Thus, the tally has increased for 11 successive weeks, indicating that oil and gas drillers are gradually returning to domestic shale plays since the commodity pricing scenario is improving drastically. Importantly, the 11 weeks of rising rig tally is the longest since June 2017.

Stocks in the Spotlight

Given the improving crude pricing environment and return of drillers to oil patches, it will be ideal for investors to consider oil explorers and producers.

Hence, we have employed our proprietary stock screener to zero down on four oil stocks that have presence in the prolific shale plays of the United States and hence are well poised to gain. Two of the stocks sport a Zacks Rank #1 (Strong Buy), while another two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Midland, TX, Diamondback Energy, Inc. (FANG - Free Report) is a pure-play Permian player with presence across more than 347,000 net acres in the Permian. The company has more than 12,300 gross horizontal locations, brightening its production outlook. Notably, the Zacks #2 Ranked stock is likely to see earnings growth of 78% in 2021.

Pioneer Natural Resources Company , headquartered in Irving, TX, recently announced approval from its board of directors to raise its quarterly cash dividend payout. Importantly, in the third quarter, the Zacks #1 Ranked company delivered free cashflow of $131 million and the metric will likely improve with the business scenario gradually getting better on rising oil prices. Thus, the upstream energy company, with a strong presence in the Permian – the most prolific basin in the United States – will likely continue to reward investors with dividend payments.

Headquartered in Dallas, TX, Matador Resources Company (MTDR - Free Report) has a strong footprint in liquid-rich Delaware Basin’s Wolfcamp and Bone Spring plays. The Zacks Rank #1 stock is likely to see earnings growth of 261.5% in 2021.

EOG Resources, Inc. (EOG - Free Report) , headquartered in Houston, TX, has premium drilling locations in all the prolific shale plays in the United States that include Eagle Ford and Delaware basin. The company, with Zacks Rank of 2, is likely to see earnings growth of 198% in 2021.

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