Oil Price Highest in More Than a Year: Bet on These 3 Stocks
Energy companies' prospects look promising as crude oil prices consistently trade in bullish territory. Given that the fate of most companies in this sector is closely tied to oil prices, it is wise to consider adding energy stocks to your portfolio. Three examples of well-positioned companies poised for growth are Matador Resources Company MTDR, Pioneer Natural Resources Company PXD, and Core Laboratories Inc. CLB.
High Oil Price
The price of West Texas Intermediate crude is trading at more than $94 per barrel, marking an extremely healthy oil pricing scenario. Indeed, the commodity reached $95.03 per barrel in Asia trading hours, reaching its highest level since August of the previous year. The outperformance stems from the possibility of tighter crude supplies, indicating a significant decrease in crude oil inventories in the United States. This further adds to the concern of squeezing global supplies owing to the Saudi Arabia-led OPEC+ supply cut, causing the commodity price to rise even further.
The favorable crude price is making the exploration and production business extremely profitable. Higher upstream activities will provide incentives for increasing production. However, there has been a slowdown in drilling activities since upstream players are prioritizing returning capital to shareholders rather than investing heavily in producing more of the commodity. Higher drilling works will improve demand for oilfield service firms as they help upstream players efficiently set up oil and gas wells.
3 Stocks to Buy
Given the backdrop, it is prudent to allocate money toward oil exploration and production companies as well as oilfield service firms. We are employing our proprietary Stock Screener to zero in on three stocks belonging to the spaces well poised to gain. One of the stocks sports a Zacks Rank #1 (Strong Buy), while the other two carry a Zacks Rank #2 (Buy).
Solid oil prices are a boon for Matador Resources’ upstream operations. This is because the #2 Ranked company has a strong presence in oil-rich core acres of the Wolfcamp and Bone Spring plays in the Delaware Basin. Favorable oil price is likely to aid it in increasing production volumes. For 2023, Matador revised its total oil production guidance to 26.8-27.5 million Bbl from the prior view of 26.4-27.3 million Bbl.
Pioneer Natural has a strong presence in the low-cost, oil-rich Midland basin — a sub-basin of the broader Permian. The upstream energy player has a massive inventory of premium wells that will likely generate significant returns for the company.
Pioneer Natural is focused on returning capital to shareholders. This includes a substantial variable dividend along with a strong base dividend. Zacks #1 Ranked PXD also employs opportunistic share repurchases to reward shareholders.
Pioneer Natural has considerably lower exposure to debt capital than the composite stocks belonging to the industry. This reflects its strong balance sheet on which the firm can rely to sail through the volatile energy businesses. You can see the complete list of today’s Zacks #1 Rank stocks here.
Being a well-known provider of patented reservoir description and production enhancement services, Core Laboratories is well-positioned to grow, thanks to improving demand for reservoir description services. Core Lab, with a Zacks Rank of 2, is also focused on reducing its debt load.
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Core Laboratories Inc. (CLB) : Free Stock Analysis Report
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
Matador Resources Company (MTDR) : Free Stock Analysis Report
