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3 Energy Stocks to Consider as Oil Price Remains Quite Healthy
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The ongoing rise in oil prices is fueling a bullish trend, encouraging more exploration and production activities. Companies in the upstream sector are likely to expand their operations in lucrative shale reserves, leading to a higher number of drilling rigs. This increase in drilling activity is anticipated to boost production, providing advantages for businesses engaged in exploration and production.
High Oil Price
The West Texas Intermediate crude price is trading at more than $71 per barrel, which is highly favorable for exploration and production activities. In its short-term energy outlook, the U.S. Energy Information Administration (“EIA”) projected the average spot price of West Texas Intermediate crude at $78.80 per barrel this year, an extremely favorable price for upstream operations.
Heightened Geopolitical Tensions Influence Market
Geopolitical tensions, especially in the Middle East, have contributed significantly to this price surge. Ongoing conflict, including the recent Israeli strike on Iranian-linked assets in Syria, has amplified fears of wider disruptions to oil supplies from the region. Iran, being a major player in the Organization of the Petroleum Exporting Countries (“OPEC+”), plays a crucial role in global supply chains.
OPEC+ continues to restrict production to maintain higher prices, a strategy likely to persist into 2024. The group has extended its production cuts, further supporting oil prices despite signs of weaker global demand. Oil prices are expected to remain high through the rest of 2024, with Brent crude averaging $82.80 per barrel, driven by ongoing OPEC+ production cuts and concerns over supply security in the Middle East.
For investors, this price environment presents an opportunity, particularly in upstream oil stocks. Companies with strong fundamentals and upward earnings revisions may be well-positioned to benefit from the favorable conditions in the oil market.
3 Stocks to Consider
Shares of oil companies are also gaining. Considering the current elevated oil prices, we have identified three upstream stocks with upward-trending earnings revisions. These three companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Northern Oil and Gas (NOG - Free Report) reached unprecedented production levels in the second quarter of 2024, averaging above 123,000 barrels of oil equivalent per day, a 36% increase from the prior-year period. This growth was fueled by heightened activity in the Permian, Utica and Marcellus regions. The effective ramp-up of new wells, combined with reduced operating expenses and strong well performance, positions NOG to sustain high production and cash flow levels throughout 2024, enhancing its financial stability and growth prospects.
With strong well performance in the Permian and Williston basins, driven by longer laterals and enhanced completion techniques, NOG's operational excellence positions it to generate consistent returns on its assets. As oil prices rise, the company stands to benefit further, amplifying its cash flow and financial stability.
Similarly, APA Corporation (APA - Free Report) sees its earnings and cash flow heavily influenced by oil and gas price fluctuations. The company is prioritizing capital allocation to high-return assets, particularly in the Permian Basin and Suriname, which are projected to drive significant production growth and cash flow, especially as APA realizes synergies from its acquisition of Callon. This strategic focus not only positions APA for sustainable long-term growth but also enhances its attractiveness to long-term investors.
The acquisition of Callon Petroleum in April 2024 added 100 MBOE/D (thousand barrels of oil equivalent per day) to APA's output, resulting in a pro-forma U.S. production guide of 307 MBOE/D for fourth-quarter 2024 — suggesting a 34% increase from fourth-quarter 2023 actual. The acquisition has expanded APA's inventory of future development sites, bolstering its production growth potential in the years to come. As oil prices climb, APA will benefit from increased revenue and cash flow, allowing for further investments and growth.
Devon Energy (DVN - Free Report) is also heavily influenced by oil and gas prices. The company has raised its 2024 oil production forecast for the second time, indicating a 5% year-over-year increase in expected volumes compared with its initial outlook. In second-quarter 2024, Devon’s total production surpassed expectations by 3%, reaching a record high of 335,000 barrels per day. This outperformance is driven by operational efficiency in its core assets, particularly in the Delaware Basin, where well productivity is about 20% higher than the industry average. Devon’s strategic focus on capital-efficient growth helps maintain low costs and robust margins.
With a diverse portfolio spread across multiple basins and a balanced exposure to oil, natural gas, and natural gas liquids, Devon is well-positioned to weather fluctuations in commodity prices. To protect itself against price volatility, the company has hedged its 2024 production volumes. Higher oil prices will further bolster Devon’s revenues and cash flow, enhancing its financial health and growth potential.
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3 Energy Stocks to Consider as Oil Price Remains Quite Healthy
The ongoing rise in oil prices is fueling a bullish trend, encouraging more exploration and production activities. Companies in the upstream sector are likely to expand their operations in lucrative shale reserves, leading to a higher number of drilling rigs. This increase in drilling activity is anticipated to boost production, providing advantages for businesses engaged in exploration and production.
High Oil Price
The West Texas Intermediate crude price is trading at more than $71 per barrel, which is highly favorable for exploration and production activities. In its short-term energy outlook, the U.S. Energy Information Administration (“EIA”) projected the average spot price of West Texas Intermediate crude at $78.80 per barrel this year, an extremely favorable price for upstream operations.
Heightened Geopolitical Tensions Influence Market
Geopolitical tensions, especially in the Middle East, have contributed significantly to this price surge. Ongoing conflict, including the recent Israeli strike on Iranian-linked assets in Syria, has amplified fears of wider disruptions to oil supplies from the region. Iran, being a major player in the Organization of the Petroleum Exporting Countries (“OPEC+”), plays a crucial role in global supply chains.
OPEC+ continues to restrict production to maintain higher prices, a strategy likely to persist into 2024. The group has extended its production cuts, further supporting oil prices despite signs of weaker global demand. Oil prices are expected to remain high through the rest of 2024, with Brent crude averaging $82.80 per barrel, driven by ongoing OPEC+ production cuts and concerns over supply security in the Middle East.
For investors, this price environment presents an opportunity, particularly in upstream oil stocks. Companies with strong fundamentals and upward earnings revisions may be well-positioned to benefit from the favorable conditions in the oil market.
3 Stocks to Consider
Shares of oil companies are also gaining. Considering the current elevated oil prices, we have identified three upstream stocks with upward-trending earnings revisions. These three companies currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Northern Oil and Gas (NOG - Free Report) reached unprecedented production levels in the second quarter of 2024, averaging above 123,000 barrels of oil equivalent per day, a 36% increase from the prior-year period. This growth was fueled by heightened activity in the Permian, Utica and Marcellus regions. The effective ramp-up of new wells, combined with reduced operating expenses and strong well performance, positions NOG to sustain high production and cash flow levels throughout 2024, enhancing its financial stability and growth prospects.
With strong well performance in the Permian and Williston basins, driven by longer laterals and enhanced completion techniques, NOG's operational excellence positions it to generate consistent returns on its assets. As oil prices rise, the company stands to benefit further, amplifying its cash flow and financial stability.
Similarly, APA Corporation (APA - Free Report) sees its earnings and cash flow heavily influenced by oil and gas price fluctuations. The company is prioritizing capital allocation to high-return assets, particularly in the Permian Basin and Suriname, which are projected to drive significant production growth and cash flow, especially as APA realizes synergies from its acquisition of Callon. This strategic focus not only positions APA for sustainable long-term growth but also enhances its attractiveness to long-term investors.
The acquisition of Callon Petroleum in April 2024 added 100 MBOE/D (thousand barrels of oil equivalent per day) to APA's output, resulting in a pro-forma U.S. production guide of 307 MBOE/D for fourth-quarter 2024 — suggesting a 34% increase from fourth-quarter 2023 actual. The acquisition has expanded APA's inventory of future development sites, bolstering its production growth potential in the years to come. As oil prices climb, APA will benefit from increased revenue and cash flow, allowing for further investments and growth.
Devon Energy (DVN - Free Report) is also heavily influenced by oil and gas prices. The company has raised its 2024 oil production forecast for the second time, indicating a 5% year-over-year increase in expected volumes compared with its initial outlook. In second-quarter 2024, Devon’s total production surpassed expectations by 3%, reaching a record high of 335,000 barrels per day. This outperformance is driven by operational efficiency in its core assets, particularly in the Delaware Basin, where well productivity is about 20% higher than the industry average. Devon’s strategic focus on capital-efficient growth helps maintain low costs and robust margins.
With a diverse portfolio spread across multiple basins and a balanced exposure to oil, natural gas, and natural gas liquids, Devon is well-positioned to weather fluctuations in commodity prices. To protect itself against price volatility, the company has hedged its 2024 production volumes. Higher oil prices will further bolster Devon’s revenues and cash flow, enhancing its financial health and growth potential.