Back to top

Image: Bigstock

Boost Your Portfolio With These 3 Promising Permian Stocks

Read MoreHide Full Article

Since the beginning of this year, West Texas Intermediate crude price has surged almost 50%. This is bringing in big gains for exploration and production businesses again, with the energy sector gradually springing back to life.

Oil Price Surges

The price of West Texas Intermediate crude is steadily approaching the $75-per-barrel mark again, highlighting a substantial improvement from the negative territory hit last April.

The recent prediction from the Organization of the Petroleum Exporting Countries (OPEC) that the global demand for oil will cross the pre-pandemic mark next year is strongly backing the crude price recovery. The rapid and widespread rollout of coronavirus vaccines is providing incentive to people to travel more, which will naturally increase the usage of oil and fuel.

A couple of weeks back, Hurricane Ida battered the Gulf of Mexico, with a significant portion of production from the region still shut down. Thus, with demand for oil continuing to improve, fears of a shortfall in crude production are acting as a catalyst for commodity price recovery.

EIA Expects Rise in US Shale Oil Production

In October, total production of oil from shale resources in the United States will likely increase by 66,000 barrels per day to 8,135 thousand barrels per day (MBbl/D), per the U.S. Energy Information Administration (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 EIA’s drilling productivity report. In the Permian, EIA projects oil production to rise by 53,000 barrels per day to 4,826 MBbls/D in October.

Time to Bet on Permian Explorers

The increasing production in Permian is being backed by higher drilling activities. In its weekly release, Baker Hughes Company (BKR) reported that from 179 oil rigs in the Permian for the week ended Jan 8, 2021, the tally has increased massively to 253 for the week ended Sep 10, 2021.

Thus, improving production in the Permian amid a favorable crude pricing environment have raised the incentive for adding stocks of companies operating in the most prolific basin.

3 Stocks in the Spotlight

Since selecting the right companies with a footprint in the Permian from the stock universe is not an easy task, we are employing our proprietary Stock Screener to zero down on three prospective stocks. Two of the stocks carry a Zacks Rank #2 (Buy), while one sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Headquartered in Dallas, TX, Matador Resources Company (MTDR - Free Report) has a strong footprint in the liquid-rich Delaware Basin’s Wolfcamp and Bone Spring plays. The Zacks #1 Ranked company has been ramping up production in the basin and has produced record daily barrels of oil equivalent volumes from Delaware in the recently concluded June quarter. By this year’s end, the company is expected to have 34 gross operated wells in progress in the Delaware basin.

Shares of this leading upstream energy player have gained 155.6% so far this year, backed by investors’ excitement about its strong second-quarter results. In the June quarter, the company’s average daily oil equivalent total production rose 26% sequentially, beating the guidance of an increment of 19-22%. For 2021, the company has witnessed upward earnings per share estimate revisions over the past 30 days.

CimarexEnergy Co. is a leading upstream energy company with a strong footprint in the Permian Basin. Cimarex’s drilling efficiencies in the basin have been improving at a fast pace with the company’s average feet drilled per day metric surging to 1,513 in the June quarter of this year from 1,252 in the third quarter of last year. The company now expects its total well cost per lateral foot in 2021 in the band of $800 to $850, suggesting a significant decline from $1,479 in 2018.

So far this year, the #2 Ranked stock has gained 113.6%, owing to the company’s increasing operating efficiencies. The consensus earnings per share estimate for 2021 has moved up 14.3% over the past 60 days. So, the stock should keep soaring.

PDC Energy, Inc. is focusing on significant value creation with a strong presence in the Delaware basin – a sub-basin of Permian – where the company’s operations spread across roughly 25,000 net acres. PDC Energy’s operating efficiencies in the basin improved drastically, with the company finishing its completion activities for 2021 in the June quarter this year.

So far this year, the company has gained 116.7% since the company has again expanded its outlook for free cash flow and increased the pace of its debt reduction.


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Matador Resources Company (MTDR) - free report >>

Published in