雅虎香港財經 3 Permian Explorers Poised to Gain as Oil Prices Stay High
The persistent bullishness in oil prices is fostering increased exploration and production endeavors. It is anticipated that upstream companies will broaden their activities in the prolific shale resources, resulting in a surge in the deployment of drilling rigs. With the escalation in drilling operations, production is poised to rise in domestic resources such as the Permian Basin, offering advantages to enterprises involved in exploration and production.
Oil Price High
West Texas Intermediate (WTI) crude is trading above $75 per barrel, creating a highly favorable environment for exploration and production activities. Additionally, the U.S. Energy Information Administration (“EIA”) forecasts the average spot price of WTI crude to reach $83.05 per barrel this year, which is exceptionally advantageous for upstream operations. This handsome crude pricing environment is primarily being driven by voluntary production cuts from the OPEC+ group and ongoing geopolitical tensions.
Permian Crude Production to Rise
In June, total oil production from shale resources in the United States will likely increase by 17,000 barrels per day to 9,853 thousand barrels per day (MBbl/D), per EIA. The shale resources comprise Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara and Permian.
Of all the resources, Permian may witness the highest increase in daily oil production next month, according to the EIA’s drilling productivity report. In the Permian, the EIA projects oil production to rise 18,000 barrels per day to 6,187 MBbls/D next month.
Low Break-Even Oil Price in Permian: A Game-Changer
The Permian Basin, especially in West Texas and southeastern New Mexico, boasts some of the lowest break-even prices in the United States, typically below $50 per barrel for existing wells, per media reports. This cost efficiency is largely due to advancements in drilling technology and the benefits of economies of scale in the region.
Permian Explorers in the Spotlight
Given the prevailing conditions, it's evident that a favorable crude pricing scenario is driving increased production levels. Enhanced production in the Permian Basin, characterized by its low break-even oil price, has heightened the interest to keep an eye on companies like Exxon Mobil Corporation XOM, Chevron Corporation CVX and Diamondback Energy, Inc. FANG, operating within this prolific basin. Each of these stocks carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
3 Stocks to Gain
ExxonMobil possesses a robust portfolio of profitable projects in the Permian region. Recently, the prominent integrated energy company finalized the acquisition of Pioneer Natural Resources, a leading oil producer in the prolific basin. This acquisition has significantly expanded the combined company's presence in the Delaware and Midland sub-basins, totaling more than 1.4 million net acres. ExxonMobil has estimated the resource potential at 16 billion barrels of oil equivalent.
With the completion of the deal, the integrated energy major's Permian production is set to more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). Moreover, ExxonMobil anticipates this production volume to reach an impressive 2 MMBoE/D by 2027.
Chevron is one of the foremost oil and gas producers in the Permian Basin. A significant portion of the company's Permian operations yields minimal to no royalty payments, ensuring consistent cash flows. Consequently, analysts anticipate substantial production growth from this prolific basin for the prominent integrated energy player.
Diamondback Energy, a leading pure-play Permian operator, has reported ongoing enhancements in the average productivity per well in the Midland Basin. Thus, the exploration and production company is likely to continue witnessing increased production volumes. FANG also has an investment-grade balance sheet.
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