The business environment for exploration and production activities has improved significantly compared to last year, when the coronavirus pandemic hit the energy market hard. The price of oil jumped, brightening the outlook for upstream energy players.
Soaring oil prices
The price of West Texas Intermediate (WTI) crude is once again approaching the $ 75 per barrel mark, signaling a substantial improvement from negative territory reached last April. Improving demand for fuel, as coronavirus vaccines are rolled out on a large scale, is primarily contributing to the rise in crude prices.
Lower crude inventories are also supporting the rise in crude prices. According to the U.S. Energy Information Administration (EIA), crude oil inventories for the week ending September 17 were recorded at 414 million barrels, marking the lowest level since October 2018.
With the return of refiners to operations after being affected by Hurricane Ida, and with the resumption of economic and social activities, the demand for oil may increase further. There will not be enough raw material supply to meet this demand for fuel, as drilling activity has slowed down, with upstream players focusing primarily on shareholder returns rather than increasing production. . Thus, improving fuel demand in a tight supply environment will continue to maintain the favorable crude price scenario for exploration and production companies operating in the prolific resources of the United States.
3 actions in the spotlight
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Magnolia Oil and Gas Company (MGY – Free Report) has a strong footprint at the heart of the low-risk and prolific Eagle Ford Shale and Austin Chalk formations. The company has set a production forecast for 2021, suggesting year-over-year growth of 6% to 9%. Thus, the increase in production in a context of favorable oil prices will improve the results of the upstream actor. Due to the positives, the company has gained 144.8% so far this year and is expected to grow further.
Whiting Petroleum Corporation (CMU – Free Report), with its footprint in the prolific Bakken / Three Forks resource area in the Williston Basin, is among the largest upstream energy companies in the United States. The company has revised upwards its oil production forecast for 2021. Thus, increasing production in a context of rising oil prices will improve its results. The main exploration and production company, which has gained 126% so far this year, is expected to continue to grow.
Based in Dallas, Texas, Matador Resource Company (MTDR – Free Report) has a strong footprint in the liquid-rich areas of Wolfcamp and Bone Spring in the Delaware Basin. The company increased production in the basin and produced record volumes of daily oil equivalent barrels from Delaware during the last quarter of June. By the end of this year, the company is expected to have 34 rough mined wells underway in the Delaware Basin.
Shares of this major upstream energy player have gained 183.4% so far this year, as the company expects its oil production to increase this year amid rising crude prices.