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Oil Price Hits 7-Year High Mark: Bet on 3 Upstream Firms

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The price of crude has reached a level never seen in seven years. This is highlighting a substantial improvement from the negative territory hit last April when the coronavirus pandemic was wreaking havoc on energy businesses. The massive crude price recovery thus brightened the outlook for oil exploration and production business.  

Spike in Crude Price

Per the Organization of the Petroleum Exporting Countries (OPEC) and a Russia-led group of oil producers, jointly called OPEC+, collective production will be expanded by 400,000 barrels a day each month. Thus, the group decided to stick to its previously agreed plan of gradually returning production to pre-pandemic levels.

With oil price’s continued climb, most analysts expected more production increase from OPEC+. Instead, the group’s decision to continue to lift production in measured steps has primarily led WTI crude to trade at more than $78 a barrel for the first time since 2014.

Oil Explorers & Producers in the Spotlight

The oil pricing scenario will continue to be favorable for oil explorers and producers since fuel demand will consistently rise as the coronavirus vaccines are being rolled out on a massive scale. Many analysts believe that the steep escalation in the commodity’s price is because of buoyant demand when inventories of crude in the United States are low.

3 Stocks to Buy

It is clear that inclusion of stocks of oil explorers and producers to one’s portfolio is highly advisable for investors. Since selecting the right companies with promising upstream operations from the stock universe is not an easy task, we are employing our proprietary Stock Screener to zero in on the three prospective names. Two stocks carry a Zacks Rank #2 (Buy) while one company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Being a leading oil producer in the prolific Bakken play of North Dakota and Montana, Continental Resources, Inc. CLR is well placed to capitalize on the crude price rally. The upstream firm is deepening focus on reducing well costs to aid its bottom line. The company is now on track to lower its well costs in Bakken by more than 7% year over year in 2021. As compared to 2018, this #1 Ranked company is planning to lower its drilling and completion costs per lateral foot in Bakken by more than 30% within the ongoing year. With the cost decline, the company is improving its capital efficiency.

Magnolia Oil & Gas Corporation MGY has a strong footprint in the core of the low-risk and prolific Eagle Ford Shale and Austin Chalk formations. The company set a 2021 production guidance, suggesting growth of 6-9% from the year-ago reported figure. Thus, rising production amid a favorable oil price scenario will drive the bottom line of the upstream player. Owing to these positives, this Zacks #2 Ranked company has gained 171.7% so far this year and is likely to increase further.

Whiting Petroleum Corporation WLL, with its footprint in prolific Bakken/Three Forks resource play in the Williston Basin, is among the largest upstream energy companies in the United States. The company has revised its oil production guidance upward for 2021. Thus, increasing production amid rising oil price will be aiding its bottom line. The leading exploration and production company with a Zacks Rank of 2 has already gained 148.4% so far this year and is likely to surge further.


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Continental Resources, Inc. (CLR) : Free Stock Analysis Report
 
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