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Centennial (CDEV) Up 152.2% in 6 Months: More Room to Run?

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·3 min read
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  • CDEV
  • SMLP
  • BKR
  • DCP

Shares of Centennial Resource Development, Inc. CDEV have soared 152.2% in the past six months compared with the industry’s 56.9% growth. The currently Zacks Rank #2 (Buy) stock has witnessed an upward revision in the Zacks Consensus Estimate for 2021 bottom-line over the past 30 days.

Let’s delve deeper into the factors behind this stock price upsurge.

What’s Aiding the Stock?

The price of West Texas Intermediate (WTI) crude has risen roughly 9% since the onset of 2021 and is now gradually approaching the $55 a barrel mark. Thus, the crude oil price has seen a substantial recovery over the past several months after the commodity price tumbled into a negative territory in April 2020.

This positive momentum is likely to continue with the recent coronavirus vaccine rollout and the massive pandemic aid bill that was lately signed into law by the outgoing President Donald Trump. These positives have already been bolstering investor confidence in a strong fuel demand rebound this year.

Notably, the recent spike in the commodity price was also backed by a surprise move by Saudi Arabia that will see the kingdom unilaterally cut 1 million barrels of crude production daily starting this February through March.  

Evidently, the business scenario for oil explorers and producers is getting brighter with a marked improvement in the crude pricing environment. In fact, oil drillers already started returning to prolific domestic shale plays, which can be gauged from the weekly rig count of Baker Hughes Company BKR. Thus, being an independent oil producer with assets spread across the core of the Delaware Basin, Centennial Resource is well poised to grow. Notably, Delaware is a sub-basin of Permian, the most prolific basin in the United States. Moreover, with about 2,400 drilling locations, the company’s production outlook seems upbeat.

Centennial Resource is also focused on reducing its lease operating expenses (LOE), driving its bottom line in turn. Notably, through the third quarter of 2020 since the comparable quarter of 2019, the company lowered 36% of its LOE per barrel of oil equivalent. Moreover, compared with the stocks in the same space, the company has less exposure to debt capital. Thus, with a stronger balance sheet, the stock is better placed to combat the coronavirus pandemic.   

Overall, the stock has more upside potential left, courtesy of a healthier business environment and its intensified focus on the most prolific shale play in America.

Other Stocks to Consider

Other top-ranked stocks in the energy space include Summit Midstream Partners, LP SMLP and DCP Midstream, LP DCP. While Summit Midstream carries a Zacks Rank of 2, DCP Midstream sports a Zacks Rank #1 (Strong Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Summit Midstream has seen northbound earnings estimate revisions for 2020 in the past seven days.

DCP Midstream has seen upward estimate revisions for 2020 earnings in the past 30 days.

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Summit Midstream Partners, LP (SMLP) : Free Stock Analysis Report
Baker Hughes Company (BKR) : Free Stock Analysis Report
Centennial Resource Development, Inc. (CDEV) : Free Stock Analysis Report
DCP Midstream Partners, LP (DCP) : Free Stock Analysis Report
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