We are now at the beginning of the third-quarter earnings, with all the major oil companies yet to report results. As the pricing scenario was healthier year over year, better-than-expected results are expected from most of the energy players like Schlumberger Limited (SLB Quick QuoteSLB - Free Report) , Halliburton Company (HAL Quick QuoteHAL - Free Report) and Chesapeake Energy Corporation (CHK Quick QuoteCHK - Free Report) .

Favorable Q3 Oil Price

Per data provided by the U.S. Energy Information Administration (“EIA”), the average West Texas Intermediate crude prices in July, August and September were recorded at $101.62 per barrel, $93.67 per barrel and $84.26 per barrel, respectively. In comparison, in the year-ago respective months, average oil prices were reported at $72.49 per barrel, $67.73 per barrel and $71.65 per barrel, per the EIA’s data.

Higher oil prices were favorable for exploration and production activities and convinced more explorers and producers to return to oil patches. The pricing scenario of natural gas was also healthy, depicting that the upstream business was lucrative in the third quarter.

Per the Zacks Earnings Trends, the energy sector’s quarterly earnings will be $58.5 billion, significantly higher than $17.9 billion in the third quarter of 2021.

How to Pick the Right Stocks?

Given the backdrop and amid a large number of energy stocks, it is by no means an easy task for investors to arrive at picks that have the potential to deliver better-than-expected earnings.

While there is no fool-proof method of picking outperformers, our proprietary methodology — the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — helps identify stocks that have high chances of delivering a positive surprise in their upcoming earnings announcement. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

The Earnings ESP shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Our Choices

Schlumberger Limited is a leading oilfield service provider. Higher oil and gas prices are likely to have aided SLB’s bottom line in the third quarter.

Schlumberger has an Earnings ESP of +0.23% and currently carries a Zacks Rank #2. It is scheduled to release earnings on Oct 21, before the opening bell.

Halliburton Company is also a well-known name in the oilfield service space, favored by handsome upstream activities.

Halliburton has an Earnings ESP of +1.54% and carries a Zacks Rank of 2, at present. It is set to release earnings on Oct 25.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Chesapeake Energy Corporation has a leading position in prolific oil and gas plays in the United States, comprising Marcellus, Haynesville and Eagle Ford shale plays.

The explorer has an Earnings ESP of +0.85% and holds a Zacks Rank #2, currently. Chesapeake is slated to release earnings on Nov 1.