Oil prices are firmly set in bullish territory, with many analysts projecting an even more favorable pricing environment in the second half of the year compared with the first. This strong pricing outlook reinforces the attractiveness of the energy sector for investors looking to capitalize on the sustained bullishness in oil prices. Thus, companies like Matador Resources Company MTDR, SM Energy Company SM and Devon Energy DVN are well poised to gain.
High Oil Price
West Texas Intermediate (WTI) crude oil is currently trading above $80 per barrel and is anticipated to maintain this strength throughout the year. According to the U.S. Energy Information Administration (“EIA”), WTI oil is projected to average $82.03 per barrel in 2024, up from $77.58 last year.
The EIA attributes this expected increase to ongoing reductions in global oil stockpiles, which are likely to keep up the upward pressure on commodity prices. Notably, Brent crude oil prices are forecasted by EIA to average $89 per barrel in the second half of this year compared with $84 in the first half.
Upstream Players to Benefit
As a result, the favorable crude pricing environment is expected to incentivize exploration and production companies to increase their output. Upstream energy companies that are expanding their presence in prolific oil fields are likely to benefit from this attractive pricing scenario. Utilizing our proprietary Stock Screener, we have identified three companies well-positioned to capitalize on these conditions. One of these upstream players sports a Zacks Rank #1 (Strong Buy), while the other two carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
3 Stocks in the Spotlight
Matador Resources recently entered into a $1.91 billion agreement to expand its footprint in the prolific Delaware Basin. With the deal expected to close in the late third quarter of 2024, the #2 Ranked company is projected to have more than 190,000 net acres in the Delaware Basin on a pro forma basis. Consequently, the company estimates that its production will exceed 180,000 barrels of oil equivalent per day, positioning it for significant growth and enhanced operational scale.
To expand its premier asset portfolio, SM Energy recently agreed to acquire 80% of XCL Resources’ oil and gas assets in the Uinta Basin for $2.04 billion. The value-driven acquisition, likely to close in September this year, will increase its inventory of net locations and boost its oil production. #1 Ranked SM Energy is also committed to maintaining its strong balance sheet, which it can rely on during low oil prices.
Devon Energy recently entered into a $5 billion accord to acquire the Williston Basin business of Grayson Mill Energy. The acquisition, likely to close by the end of the third quarter of this year, will aid the company in increasing its oil production and boosting its inventory of key drilling locations. Thus, with the expansion of its footprint in the Williston Basin, Devon Energy, with Zacks Rank of 2, will be immediately able to increase its key financial metrics.
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Devon Energy Corporation (DVN) : Free Stock Analysis Report
SM Energy Company (SM) : Free Stock Analysis Report
Matador Resources Company (MTDR) : Free Stock Analysis Report
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