The Zacks Analyst Blog Highlights: Comtech Concho Resources, RSP Permian, EOG Resources, Pioneer Natural Resources and Energen
For Immediate Release
Chicago, IL – April 5, 2018 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Comtech Concho Resources Inc. CXO, RSP Permian Inc. RSPP, EOG Resources, Inc. EOG, Pioneer Natural Resources Company PXD and Energen Corporation EGN.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday’s Analyst Blog:
4 Ways to Get Rich Off Permian Basin Oil Boom
Concho Resources Inc.said last week that it will buy RSP Permian Inc. for about $9.5 billion in the latest notable transaction involving the lucrative Permian Basin. The region has been gripped by a deal frenzy in the last few years, with a series of acquisitions, mergers and drilling rights involving both ‘Big Oil’ and smaller energy companies. It is worth noting that among last year's energy deals, more than 36% (valued at $24.3 billion) were Permian-focused, reflecting its status as the dominant domestic growth area for onshore oil production.
Agreed, the sentiment in the oil market has not been this good in years, with U.S. crude prices hitting a more than three-year high of around $66 recently – a spectacular recovery from below $30 in early 2016.
But regardless of the commodity’s price movement though, one oil-producing area that continues to attract investors is the low-cost Permian Basin spread over west Texas and New Mexico. According to some estimates, the region – that has been churning out crude continuously for nearly 100 years – has produced in excess of 30 billion barrels of oil since output began in 1921. Incredibly, despite that impressive output history, analysts maintain that its best days are yet to come. In fact, Permian Basin is touted as the key reason that U.S. crude production has now overtaken industry behemoth Saudi Arabia and is poised to surpass Russia shortly to become the global oil leader.
The Permian ‘Super’ Basin
A sedimentary basin lying underneath the western part of Texas and the south-eastern part of New Mexico, the Permian Basin Shale covers roughly 75,000 square miles, almost half the size of California.
Experts say that it’s cheaper to drill and complete oil wells in the Permian Basin, as compared to most other major fields. Moreover, there are certain parts of the shale play whose well-returns are the best in the U.S. With crude prices still down significantly from their 2014 levels, well returns have become a very important metric to gauge profitability.
Per S&P Global Platts – the leading independent commodities and energy data provider – the average wellhead break-even price for oil producers in the Permian shale play has come down to a staggering $33 per barrel. Permian’s attractive economics means that producers can make money and sustain growth there at the current, $60-a-barrel price.
The low operating cost stems from the region's extensive pipeline infrastructure, plentiful labor and supplies, and relatively warm winters that makes year-round work possible. Most other domestic share regions need far higher prices to support new developments and expansions.
Unsurprisingly then, the Permian has drawn the lion’s share of energy investment. Of late, more than a third of the total amount spent on all U.S. deals was spent on Permian land purchases and leases. No other major oil region in the country has come close to this activity.
Massive Reserve Potential Attracting Producers
According to business information provider IHS Markit, the Permian play is estimated to hold a staggering 60-70 billion barrels of recoverable crude oil - enough to feed all the domestic refineries for 12 years.
It is primarily because of the Permian shale that volume from U.S. oil fields has risen 24% since mid-2016 to more than 10.4 million barrels per day - the most since the EIA started maintaining weekly data in 1983.
Despite the slight uptick in service costs, a growing number of companies are devoting bulk of their investments into the Permian as they turn their attention to less-expensive projects that can deliver cash quickly in today’s ‘moderate oil’ environment. The recent Concho-RSP deal is likely to spur the “Permania” that has engulfed the U.S. oil industry and herald another consolidation wave in the Permian region.
Four Permian Basin Oil Stocks to Buy
Though a number of companies have built sizeable acreage positions in the Permian Basin, we have shortlisted four of them that might fetch you outstanding returns. Each of our picks boast of a Zacks Rank of #1 (Strong Buy) or #2 (Buy), which justifies a company’s strong fundamentals. You can see the complete list of today’s Zacks #1 Rank stocks here.
Concho Resources, a #1 Ranked stock, is our first pick. The impending RSP Permian acquisition will make the Midland, TX-based company one of the top energy producers in the lucrative play. The deal adds 92,000 acres of complementary holdings to Concho’s Permian portfolio, expanding the total Permian acreage of the company to 640,000 net acres. The combined entity is set to run 27 rigs in the region, marking one of the largest drilling programs in the Permian shale play.
Then we have EOG Resources, Inc.. This Zacks Rank #1 stock has significant interests in the Permian Basin. In 2016, the company scooped up privately held Yates Petroleum Corp for $2.5 billion to expand its holdings in the region. In the most recently reported quarter, EOG Resources’ total volume rose 13.4% year over year to 60.9 million barrels of oil equivalent and surpassed the Zacks Consensus Estimate of 60 MMBoe. This was primarily on account of higher production and improved well performance in the Permian Basin where it holds approximately 630,000 net acres.
Third on the list is Pioneer Natural Resources Company. An independent oil and gas exploration and production company based in Irving, TX, the Rank #2 stock’s growth continues to be focused on the Permian operations with more than 20,00 drilling locations across 750,000 gross acres. Its world-class assets in the region is likely to see year-over-year production growth of 19-24% in 2018. In fact, Pioneer Natural Resources plans to operate 20 horizontal rigs in the play this year.
Energen Corporation is another company we recommend. This Birmingham, AL-based Permian pure play boasts of acreage in some of the high-quality areas of the Basin in the Delaware and Midland. Carrying a Zacks Rank of 2, Energen’s top-tier inventory of more than 4,000 net locations supports net, undeveloped resource potential of 2.7 billion barrels of oil equivalent. Coupled with ever improving operating efficiencies, the company expects year-over-year production growth of 25% in 2018.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com/
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Energen Corporation (EGN) : Free Stock Analysis Report
Pioneer Natural Resources Company (PXD) : Free Stock Analysis Report
EOG Resources, Inc. (EOG) : Free Stock Analysis Report
Concho Resources Inc. (CXO) : Free Stock Analysis Report
RSP Permian, Inc. (RSPP) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research
