Image: ShutterstockThe bullish trend in oil prices looks set to continue, favoring exploration and production activities. Upstream players are likely to keep increasing their operations in prolific shale resources, consequently raising the count of drilling rigs. With the uptick in drilling activities, production is expected to increase, benefiting businesses involved in exploration and production.
Oil Price Still High
The West Texas Intermediate crude price has recently been seen trading at more than $70 per barrel, which is highly favorable for exploration and production activities. Also, in its short-term energy outlook, the U.S. Energy Information Administration (“EIA”) projected the average spot price of West Texas Intermediate crude at $78.07 per barrel this year, which is still a handsome price for upstream operations.
Permian Oil Production to Rise
In January, total oil production from shale resources in the United States will likely decrease by 1,000 barrels per day to 9,692 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, only Permian and Bakken will witness an increase in daily oil production this month, according to the EIA’s drilling productivity report. In the Permian, the EIA projects oil production to rise by 5,000 barrels per day to 5,986 MBbls/D this month.
Permian Explorers in the Spotlight
It has been crystal clear that a favorable crude pricing scenario is backing higher production volumes. Improving Permian production amid healthy oil prices has raised the incentive to keep an eye on companies like Exxon Mobil Corporation (XOM – Free Report), Chevron Corporation (CVX – Free Report), and Diamondback Energy, Inc. (FANG – Free Report), operating in the most prolific basin. All the stocks carry a Zacks Rank #3 (Hold).
3 Stocks to Gain
ExxonMobil and Chevron have solid upstream businesses. In the Permian Basin, ExxonMobil has a solid pipeline of profitable projects. Chevron, too, has a strong foothold in the Permian, where a significant portion of the energy major’s acreage has minimum royalty payments.To further strengthen its presence in the Permian, ExxonMobil has entered into a staggering $59.5 billion all-stock deal to buy Pioneer Natural Resources (PXD – Free Report). This is because Pioneer Natural is one of the foremost oil producers operating in the Permian Basin.With the deal closure expected in the first half of 2024, Permian production of the integrated energy major will more than double to 1.3 million barrels of oil equivalent per day (MMBoE/D). Furthermore, ExxonMobil projected that this production figure will rise to an impressive 2 MMBoE/D by 2027.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.More By This Author:4 Stocks to Watch as Bitcoin Rally Continues Into 2024Goldman Sachs Outperforms Broader Market2 Stocks To Tap Improving Prospects In The Software & Services Industry
