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5 Oil Stocks Your Portfolio Must Have Ahead of Q1 Earnings

Nalak Das

Crude oil prices, which plunged in the fourth quarter of 2018, have rebounded significantly in 2019. Oil prices recorded the best quarterly gain in the first three-month period of 2019 since 2009 and the best first-quarter gain since 2002.

On Apr 15, the U.S. benchmark West Texas Intermediate (WTI) crude closed at $63.40 a barrel while the global benchmark Brent crude ended at $71.18 a barrel. Year to date, prices of both WTI and Brent crude are up nearly 41%.

Supply Shortages Boost Oil Prices

OPEC and Russia-led oil exporters decided to cut crude oil supplies by 1.2 million barrels per day (bpd) in 2019. As reported by Reuters, Saudi Arabia has decided to keep its oil production below $7 million bpd in April, much lower than Saudi’s previous estimate of 10 million bpd.

On Jan 28, the U.S. government announced sanctions on Venezuela. According to the International Energy Agency (IEA), Venezuela’s crude output is likely to decline from 1.3 million bpd in 2018 to 750,000 bpd in 2019 owing to U.S. sanctions. Moreover, oil export dropped by 159,000 bpd to just under 2.8 million bpd in Iran owing to the imposition of U.S. sanctions.

Meanwhile, a full-scale civil-war has started in Libya and U.S. military has decided to pull out a small contingent of American forces from that country. Breakout of civil-war will significantly disrupt global oil supply in the near future. Per Bloomberg, Libya’s crude production came in at a significant 1.1 million barrels a day in March.

Strong Demand to Drive Oil Prices

On Mar 11, the IEA projected that global crude oil demand will remain firm at least up to 2024 although the rate of demand growth will decline. By this time, oil demand will rise by 7.1 million bpd.

Despite a surge in sales of electric car and massive oil exploration in the United States, soaring demand for oil for the petrochemical industry, especially for plastic and growing demand for aviation oil will support crude oil prices.

Moreover, robust U.S. job data and manufacturing data in March as well as a rebound in China’s manufacturing PMI in March will help oil prices to remain firm in the near term. A solution to the U.S.-China trade dispute will be a major boost for the world economy.

Our Top Picks

At this stage, investment in stocks engaged in exploration and production of crude oil with a favorable Zacks Rank will be prudent. We have been able to narrow down our search to five stocks with a Zacks Rank #2 (Buy) and positive Earnings ESP. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

A positive Earnings ESP and a Zacks Rank #3 (Hold) or better should prove to be lucrative should prove to be lucrative. Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.

Anadarko Petroleum Corp. APC engages in the exploration, development, production, and marketing of oil and gas properties. It has an Earnings ESP of +1.96% for the current quarter. The Zacks Consensus Estimate for the current quarter and year has improved 4% and 14.5%, respectively, over the last 30 days. The company is expected to release earnings results on May 7.



Chaparral Energy Inc. CHAP engages in the acquisition, exploration, development, production, and operation of onshore oil and natural gas properties primarily in the United States. It has an Earnings ESP of +312.5% for the current quarter. The Zacks Consensus Estimate for the current quarter and year has improved 300% and 33.3%, respectively, over the last 30 days. The company is expected to release earnings results on May 9.



Rosehill Resources Inc. ROSE is an independent oil and natural gas company focusing on the acquisition, exploration, development, and production of unconventional oil and associated liquids-rich natural gas reserves in the Permian Basin. It has an Earnings ESP of +425.01% for the current quarter. The Zacks Consensus Estimate for the current quarter and year has improved 125% and 190%, respectively, over the last 30 days. The company is expected to release earnings results on May 13.



PDC Energy Inc. PDCE, an independent exploration and production company, acquires, explores, develops, and produces crude oil, natural gas, and natural gas liquids in the United States. It has an Earnings ESP of +6.9% for the current quarter. The Zacks Consensus Estimate for the current quarter and year has improved 7.3% and 15.7%, respectively, over the last 30 days. The company is expected to release earnings results on May 1.



Parsley Energy Inc. PE is an independent oil and natural gas company engaged in the acquisition, development, exploration, production, and sale of crude oil and natural gas properties in the Permian Basin in west Texas and Southeastern New Mexico. It has an Earnings ESP of +14.3% for the current quarter. The Zacks Consensus Estimate for the current quarter and year has improved 4.5% and 7.9%, respectively, over the last 30 days. The company is expected to release earnings results on May 1.



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