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Here's Why You Should Keep an Eye on These 3 Upstream Stocks
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Recently, oil price has been under pressure, which is worrying energy investors. The concern primarily stems from uncertainties over fuel demand growth from China and the rising supply of Russian oil in the global markets. To offset these worries, Pioneer Natural Resources Company – a leading oil producer in the most prolific shale play in the United States – recently argued that the commodity’s pricing environment will be higher later in 2023.
Oil Price Will Be High Later in 2023
Beth McDonald, executive vice president of Pioneer Natural, said at the RBN Energy crude export conference in Houston that amid limited supply growth, demand for crude across the globe continues to rise. This will lead oil price to be more handsome later this year.
Higher labor and material expenses are hurting profit margins, thereby limiting spending by upstream players for exploration and production activities. Also, upstream players mainly focus on stockholder returns than boosting output since investors ask companies to return more cash. These are the prime factors justifying limitations in supply growth as upstream companies will continue to focus on capital discipline, despite the recent decision from Saudi Arabia, the top producer of the OPEC cartel, of another one million barrels per day production cut from July.
McDonald believes that over the next three to five years, crude will trade between $70 per barrel to $100 per barrel.
Pioneer Natural Resources is a premier operator in the Permian basin. PXD, having a fortress balance sheet, expects oil production for 2023 to be in the range of 357-372 thousand barrels per day (MBbl/D), suggesting an increase from almost 352 MBbl/D. Thus, increasing production amid higher prices will be profitable for Pioneer Natural.
Diamondback Energy, Inc. (FANG - Free Report) is a leading pure-play Permian operator. Diamondback expanded its footprint in the Midland basin since it acquired all leasehold interest and associated properties of Lario Permian, LLC — a wholly-owned affiliate of Lario Oil & Gas Company. FANG also has an investment-grade balance sheet.
Solid oil prices will be a boon for Matador Resources Company’s (MTDR - Free Report) upstream operations. This is because the company has a strong presence in oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Favorable oil price is likely to aid it in increasing production volumes. For 2023, Matador reiterated its oil equivalent production guidance of 44.35-46.25 million barrels. The metric suggests an improvement from 38.5 million oil-equivalent barrels reported in 2022. MTDR is now expecting production at the high end of the projected band.
On another positive note, Matador plans to turn to sales a net of 97.5 wells this year, including operated and non-operated wells. The prime priorities that the firm has set for this year are lowering debt levels, delivering free cashflows and maintaining or increasing dividends.
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Here's Why You Should Keep an Eye on These 3 Upstream Stocks
Recently, oil price has been under pressure, which is worrying energy investors. The concern primarily stems from uncertainties over fuel demand growth from China and the rising supply of Russian oil in the global markets. To offset these worries, Pioneer Natural Resources Company – a leading oil producer in the most prolific shale play in the United States – recently argued that the commodity’s pricing environment will be higher later in 2023.
Oil Price Will Be High Later in 2023
Beth McDonald, executive vice president of Pioneer Natural, said at the RBN Energy crude export conference in Houston that amid limited supply growth, demand for crude across the globe continues to rise. This will lead oil price to be more handsome later this year.
Higher labor and material expenses are hurting profit margins, thereby limiting spending by upstream players for exploration and production activities. Also, upstream players mainly focus on stockholder returns than boosting output since investors ask companies to return more cash. These are the prime factors justifying limitations in supply growth as upstream companies will continue to focus on capital discipline, despite the recent decision from Saudi Arabia, the top producer of the OPEC cartel, of another one million barrels per day production cut from July.
McDonald believes that over the next three to five years, crude will trade between $70 per barrel to $100 per barrel.
3 Stocks to Keep an Eye On
Here, we present three leading upstream players well poised to gain in the favorable business scenario. All the stocks carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Pioneer Natural Resources is a premier operator in the Permian basin. PXD, having a fortress balance sheet, expects oil production for 2023 to be in the range of 357-372 thousand barrels per day (MBbl/D), suggesting an increase from almost 352 MBbl/D. Thus, increasing production amid higher prices will be profitable for Pioneer Natural.
Diamondback Energy, Inc. (FANG - Free Report) is a leading pure-play Permian operator. Diamondback expanded its footprint in the Midland basin since it acquired all leasehold interest and associated properties of Lario Permian, LLC — a wholly-owned affiliate of Lario Oil & Gas Company. FANG also has an investment-grade balance sheet.
Solid oil prices will be a boon for Matador Resources Company’s (MTDR - Free Report) upstream operations. This is because the company has a strong presence in oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Favorable oil price is likely to aid it in increasing production volumes. For 2023, Matador reiterated its oil equivalent production guidance of 44.35-46.25 million barrels. The metric suggests an improvement from 38.5 million oil-equivalent barrels reported in 2022. MTDR is now expecting production at the high end of the projected band.
On another positive note, Matador plans to turn to sales a net of 97.5 wells this year, including operated and non-operated wells. The prime priorities that the firm has set for this year are lowering debt levels, delivering free cashflows and maintaining or increasing dividends.