The ongoing rise in oil prices is fueling a bullish trend, encouraging more exploration and production activities. Companies in the upstream sector are likely to expand their operations in lucrative shale reserves, leading to a higher number of drilling rigs. This increase in drilling activity is anticipated to boost production, providing advantages for businesses engaged in exploration and production.
Oil Price Still High
West Texas Intermediate crude price is trading at more than $75 per barrel, which is highly favorable for exploration and production activities. In its short-term energy outlook, the U.S. Energy Information Administration (“EIA”) projected the average spot price of West Texas Intermediate crude at $82.15 per barrel this year, an extremely favorable price for upstream operations.
Permian Oil Production to Rise
In March, total oil production from shale resources in the United States will likely increase by 20,000 barrels per day to 9,716 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 will witness the highest 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 14,000 barrels per day to 6,085 MBbls/D this month.
Permian Explorers in the Spotlight
It has been apparent that a favorable crude pricing scenario is backing higher production volumes. Improving Permian production amid healthy oil prices raised the incentive to keep an eye on companies like Exxon Mobil Corporation XOM, Chevron Corporation CVX and Diamondback Energy, Inc. FANG, operating in the most prolific basin. All the stocks carry 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 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.