3 oil stocks up for grabs as OPEC+ reassures Omicron’s slight impact

OPEC and its non-OPEC allies, collectively referred to as OPEC+, reassured Omicron’s limited impact on the energy sector, leading energy stocks to rally.

OPEC+ Decision: Fresh Momentum for Crude Rally

The price of West Texas Intermediate (WTI) crude has once again touched the $77 per barrel mark, marking an improvement of more than 51% over the past year. With the massive rollout of coronavirus vaccines and booster doses and antiviral pills proving effective against Omicron, the economy may overcome the recent spike in coronavirus cases. This improves the outlook for fuel demand.

OPEC+’s new decision to keep pumping more oil reassured that Omicron’s effect on fuel demand is likely to be moderate. OPEC+ has decided that in February they will collectively increase production by an additional 400,000 barrels per day. The OPEC+ decision has given fresh impetus to the rise in crude prices.

Number of platforms to increase

A favorable crude price scenario is likely to encourage some drillers to return to the well pad. In its weekly publication, hugue baker Society BKR said the number of rigs engaged in oil exploration and production in the United States was 480 for the week through Dec. 31, consistent with the tally from the previous week. Thus, the count has increased in eight of the previous 10 weeks.

The number of rotating platforms, published by Baker Hughes, is usually published in leading newspapers and trade publications. Baker Hughes data, released at the end of each week since 1944, helps energy service providers assess the overall business environment for the oil and gas industry. The number of active rigs and its comparison to the previous week’s figure indicates the trajectory of demand for Baker Hughes’ oilfield services from exploration and production companies.

Skip production

The improvement in the price of oil, which helps the number of rigs to increase, in turn paints the picture that the upstream business environment will continue to be favorable. This will likely lead to increased production of the product.

In January 2022, total oil production from shale resources in the United States will likely increase by 96,000 barrels per day to 8,438,000 barrels per day (MBbl/D), according to the Energy Information Administration (EIA). the United States. Shale resources include Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.

Of all the resources, the Permian will see the biggest increase in daily oil production next month, according to the EIA’s drilling productivity report. In the Permian, the EIA forecasts that oil production will increase by 71,000 barrels per day to reach 5,031 MBbls/d in January 2022.

3 shares to win

We focused on three oil stocks that have seen a surge in share prices following OPEC+’s recent announcement that Omicron will not negatively impact fuel demand. These stocks are also well positioned to continue to gain. The shares currently carry a Zacks rank of No. 3 (Hold). You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

Based in Dallas, TX, Matador Resource Company MTDR has a strong footprint in the liquid-rich Wolfcamp and Bone Spring areas of the Delaware Basin. Matador Resources increased production while delivering strong well results in the Delaware Basin – a larger Permian sub-basin.

Matador Resources expects total oil equivalent production to increase by 13% in 2021, guaranteeing good cash flow amid an improving oil price. OPEC+’s recent decision to pump more oil, in anticipation of Omicron’s limited impact, led Matador Resources to gain more than 10% on Jan. 4.

PDC Energy, Inc. PDCE is focused on creating significant value with a strong presence in the Delaware Basin – a sub-basin of the Permian – where the Company’s operations span approximately 25,000 net acres. Despite the coronavirus pandemic, PDC Energy did quite well last year and forecast 2021 free cash flow of over $900 million.

PDC Energy is also focused on debt reduction. In order to strengthen its balance sheet, PDC Energy plans to reduce its leverage by more than 40% in 2021. OPEC+’s recent decision to pump more oil led PDC Energy stock to gain 6.3% on January 4.

Diamondback Energy, Inc. FANG is a leading pure-play operator in the Permian, having a strong footprint on 413,000 net acres in the prolific Midland and Delaware sub-basins. Diamondback Energy raised its average daily production forecast for 2021 to 370-372,000 barrels of oil equivalent per day (MBoE/d) from the prior range of 363-370 MboE/d. Thus, FANG will generate significant cash flow through higher production and an increase in the price of crude.

The recent OPEC+ decision led Diamondback Energy to gain 6.6% on January 4. Zacks consensus estimates for Diamondback Energy’s earnings per share for 2021 and 2022 indicate a year-over-year increase of 269.7% and 54.9%, respectively.

Want the latest recommendations from Zacks Investment Research? Today you can download 7 best stocks for the next 30 days. Click to get this free report

PDC Energy, Inc. (PDCE): Free Stock Analysis Report

Baker Hughes Company (BKR): Free Stock Analysis Report

Diamondback Energy, Inc. (FANG): Free Stock Analysis Report

Matador Resources Company (MTDR): Free Stock Analysis Report

To read this article on Zacks.com, click here.

Zacks Investment Research

Source link

Felix J. Dixon