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ConocoPhillips Chooses Eagle Ford Over Permian: Here's Why

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ConocoPhillips COP is giving more importance to the Eagle Ford shale play than the crowded Permian Basin, per Ryan Lance, CEO of the upstream energy giant.

Since mid-2016, there are has been a steep rise in oil rig count in the Permian Basin, where the number of rigs currently stands at more than 400, per U.S. Energy Information Administration (EIA). Meanwhile, in the Eagle Ford, the count is considerably lower at less than 100.

In terms of production, the EIA graph shows consistent growth in the Permian Basin. Since mid-2016, the growth gets steeper and production is now heading toward 3.5 million barrels per day. Meanwhile the latest EIA data shows that production in Eagle Ford is below 1.5 million barrels a day.

With the gradual recovery in crude that started after the commodity touched multi-year lows in early 2016, majority of the drillers and explorers flocked to the Permian Basin. This has resulted in a bump up in cost of production in Permian Basin following a bottleneck in oil pipeline and labor shortage.

ConocoPhillips is expecting to benefit from the current scenario as cost of operations in the Eagle Ford is relatively lower. The company’s prime focus on the Eagle Ford is reflected in the first-quarter 2018 production picture. Through the quarter, the company’s daily oil equivalent production from the Permian Basin was recorded at 19,000 barrels, considerably lower than 163,000 barrels from Eagle Ford.

Headquartered in Houston, TX, ConocoPhillips has rallied 50.5% over the past year, outperforming the industry’s 36.3% gain. The stock currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the energy sector are BP plc BP, WildHorse Resource Development Corporation WRD and W&T Offshore, Inc. WTI. BP and WildHorse sport a Zacks Rank #1 (Strong Buy), while W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BP managed to beat the Zacks Consensus Estimate in three of the last four quarters.

WildHorse is expected to see year-over-year earnings growth of 288.4% in 2018.

W&T Offshore will likely witness earnings growth of 7.1% in 2018.

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