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These 3 Energy Stocks Are on Fire Right Now (And at Least 1 Still Looks Worth Buying)

Matthew DiLallo, The Motley Fool

After a turbulent start to the month, the stock market bounced back sharply this week, taking most stocks with it. Not only did fears of inflation begin subsiding, but several companies reported strong year-end results and even better outlooks for 2018. The energy industry delivered one of the largest doses of earnings reports, which, along with higher oil prices, helped send several stocks soaring this week. Three that stood out are Denbury Resources (NYSE: DNR), EQT Corp (NYSE: EQT), and Diamondback Energy (NASDAQ: FANG).

Bounding with optimism

Denbury Resources led this trio higher, with its stock jumping more than 21% this week. While a rebound in the price of oil helped drive that move, the main catalyst was the oil producer's operational update and expectations for 2018. Denbury said that production in the fourth quarter averaged more than 61,000 barrels of oil equivalent per day, which was 1% higher than the third quarter and in line with expectations. The highlight, however, was that Denbury completed a successful exploration well in the Mission Canyon formation of the Cedar Creek Anticline in the Rockies. The well delivered an average of 1,050 barrels of oil per day during its first month, which exceeded expectations. That opened another low-risk, low-cost development area for the company, which gives it the confidence that production will rise 3% this year. That sets the stage for 2018 to "be a transformative year for Denbury," according to CEO Chris Kendall.

Oil pump during a beautiful golden sunrise.

Image source: Getty Images.

EQT Corp was the next best performer of this group, with its stock bounding 16% in the last week. That's after the country's largest natural gas producer posted strong fourth-quarter results. Overall, the company reported $167.5 million, or $0.76 per share, in adjusted earnings, which trounced expectations by a whopping $0.52 per share. A 23% improvement in commodity prices, when combined with a 17% increase in volumes, helped fuel the earnings beat. Meanwhile, the company expects to continue growing production at a rapid rate in 2018, with it planning for another 17% increase fully funded by internally generated cash flow at current commodity prices. Further, the company noted that it expected to approve a plan to address the continued discount in its stock price and the value of its assets by the end of this month.

Diamondback Energy rounded out the trio by rising 14% this week, continuing its market-crushing run over the past few years. Like EQT Corp, stronger-than-expected fourth-quarter results fueled Diamondback's most recent surge. In the oil driller's case, it posted a profit of $1.56 per share, which beat expectations by $0.05 per share thanks to a 9% increase in production during the quarter, pushing output up a jaw-dropping 79% over the past year. While Diamondback won't grow quite as fast this year, the company still anticipates fast-paced growth of 40% year over year at the midpoint of its guidance range. Further, the company can comfortably fund that gaudy growth rate while living within cash flow at current oil prices. Because of that, Diamondback initiated a quarterly dividend.

Keeping its foot on the gas

It's possible to make the case that all three of these oil and gas stocks could continue heading higher this year. That said, the one that seems to have the most room to run is EQT Corp. That's because the company owns a valuable midstream business that the market doesn't give it much credit for holding. It's currently evaluating the best way to address this value disconnect and should unveil its plan later this month. That upcoming catalyst could provide more fuel to drive this stock higher in the coming year, though that's just one of the many things that make it a top natural gas stock to buy for the long term.

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Matthew DiLallo owns shares of Denbury Resources. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.